Farming the Pension Market

When we think of the pension market, we usually target professionals, such as doctors, lawyers and accountants.  We generally do not see the farming community as a target market. However, many farmers are good prospects for a pension plan.

Farmers often delay preparing for retirement, because they have to put their money back into their farms.  A single piece of farm equipment can cost several hundred thousands of dollars.  As a result, they do not have significant disposable income.  However, we are beginning to see older farmers, who are more established and may have five or six hundred thousand dollars of Schedule F income.  Many of these farmers are looking to sell their farms and retire.  At this point in their careers, they are less interested in buying expensive new equipment, than funding their retirement.

A 412(e)(3) fully-insured defined benefit plan is the perfect solution for a farmer looking to make up for lost time.  It provides the most efficient to way to fund retirement.  In many cases, a farmer will be able to contribute as much as $3.00 to the plan for each dollar of income.  In addition a 412(e)(3) fully-insured defined benefit plan offers a guaranteed benefit at retirement.  This eliminates investment risk.  A plan may also be able to include the farmer’s spouse.  If the farmer is receiving Schedule F income, the farmer will be treated as a sole proprietor.  If the farmer’s spouse is paid W-2 income for work done on the farm, the spouse can also receive a retirement benefit from the plan.

An advisor with access to the farming community should take note of this very strong market.  Farming can be big business, and farmers have the same needs and desires as other professions.  To learn more about pensions or to get help with a quote, contact your RMC regional representative today or our pension department at 239.298.8210.