What we can do when we retire

If we are going to sell the farm, the three big questions are:
    What will we do?
    Where will we live?
    What are we going to do with the money?
Although we may think there are obvious answers to all three questions, they may not be so obvious to many others. It takes time to sort through the decisions and get the answers.

So, who do we talk to anyway? We should start with our professional advisors, such as Solicitor, Accountant, Consultant, and Bankers etc. They should know us and our business as well as anybody. We will talk to family and friends too, but they are often not well informed, will only look at it from their point of view and are not qualified to give balanced advice. Just remember, we need to be very careful and assess the agenda of anybody that we talk to. If we are going to sell, everybody will want to invest our money to get a cut for themselves.

Getting back to the three questions, No 1 is: What will we do? This can be easy for some and difficult for others. Golf everyday gets boring pretty quickly and we need something to get up for in the morning. We could work at the local farm outlet store - RD1, PGG Wrightsons, and so on. There is also real estate, lawn mowing rounds etc. Generally we will find it harder the older we get to obtain meaningful work.

No 2 is: Where will we live? Will we keep a block of land with a house, live there and sell the rest of the farm? Will we move to town, realizing that we have lost our taxable activity? Remember a house in town will cut well into our cash reserves. Robert Kiosaki calls a house a liability, not an asset. We could rent long term and invest the cash wisely. I have seen people very happy doing this.

Let's do the numbers:
    House cost say 700,000
    $700,000 invested at say 8% 56,000
    Less rent of say $350.00 p.wk. x 52 weeks -18,200
    Giving a benefit per annum of $37,800
    $37,800 ÷ 52 weeks equal $726.92 per week. Not bad eh?
With this option, we are not tempted to renovate, put in new kitchens, rebuild the bedrooms etc. More than that, we can change houses or towns at virtually no cost. This is particularly important until we get more settled.

Some of us go to the beach to live. This suits some and not others. A new town or a new beach can be a very lonely place if you don't know anyone in the street. Beach towns can be desolate over the winter months and very lonely.

Lastly, No 3 is: What are we going to do with the money? Now this is the big one. We can make reasonably well informed decisions on the first two questions, but where we invest the money is the important question. Remember selling will be hugely stressful. I recommend farmers put their money in the bank for a few months until they get settled and find their feet.

Exactly where to invest will depend on a number of issues, particularly on our appetite for risk. It could stay in the bank, but inflation, at the current level will see our capital being eaten away very quickly. We could invest in commercial property, either by ourselves or with partners. Minor shares in commercial property can be a problem, but joint investing in commercial is a good idea. We could invest in the share market. This would see our money given to a company to invest in their business to make a return. Part of the return comes back to us as dividends. If the company does well, our share value goes up, likewise if it does not do so well then the share value goes down.

We need to get good advice. We need to get a balanced portfolio and we need to think very carefully about what we do. There are taxation issues on sale of farms and sale of stock. There may be the trust to think about. If you have a family trust, who owns what? Does the trust own the new house in town and the shares …? You need to de-register the GST. Could we occupy the house and lease the farm to a third party? This is becoming an increasingly popular option.

In summary, the decision to sell should be made carefully. We should get good professional advice and expect to pay for it. We should avoid those who have a vested interest in what we do. We should be on the lookout for something to do to stop us being bored and to give us the will to live. We should be very careful how and where we invest our money as it is all uncharted territory. We have worked hard to build our asset base, but I can tell you it is very easy to lose money and we should be very careful.


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