Tax and financial management 201

Narrator: We are grateful that you are joining us for another episode of the Ag View Pitch, as we know that your time is very valuable. Our team at Ag View Solutions is always here for you for any questions or comments that you may have. Please feel free to reach out to us at cbarron@agviewsolutions.com. And now here is your host, Chris Barron.

Chris

Barron: Welcome everybody to another episode of the Ag View Pitch. Today we're gonna have an interesting conversation with a couple of experts. We have with us today Paul Niefer, the tax expert, and then we also have with us Mike Finley, the financial expert. So I was lucky enough to get you guys both rounded up together and we've had some time here today working on a number of different things in our farm operation and in our business. And I've had the luxury of watching you two guys talk. So start out, Paul, welcome. Thanks for being here.

Paul

Neiffer: Thank you. It seems like when I come here, if it's harvest time, I bring rain, and if it's not harvest, I bring heat. So I'm— we need to sometimes maybe flip that around.

Chris

Barron: Yeah, yeah. As we record this, it's about 90-some degrees out, and we're getting, as Joe Vaklovic calls it, the heat doom, or the doom of heat, or whatever you call it. The dome of heat. Dome of heat, yeah, or something like that.

Mike

Finley: I don't know.

Chris

Barron: But it's welcome for a while now anyway, as long as you bring rain time you come. Yeah, yeah. So Mike, uh, thank you for being here again. We've done, um, what, 3 podcasts together? So if those who have are listening to this, if you have not listened to, uh, the first one we did was Financial Happiness, the second one we did was Investing 101, and then we did a Retirement 101. And so kind of what I was thinking we would call this is Tax and Finance Management 201 because we've got the tax expert and the financial expert. So Mike, thanks for being here.

Mike

Finley: Happy to be here.

Chris

Barron: Yeah, well, it's good to have you, and I'm excited to listen to you guys, um, kind of even question each other because I'm, I'm amongst people that are quite a bit higher level than I am of understanding some, some key things. And so what I want to do though is I was listening to you guys at lunch, we were talking a little bit about, you know, farmers, and we have a tendency to like to put all our money in land, and we like, and we need to have working capital, we need our cash We need liquidity, we need to have all that there. And you guys can take turns, or one of you can go and then back the other one up. But why, as a farmer, is it important that we have financial diversification? I'll throw that out there as a first question to you guys.

Mike

Finley: So I'll go ahead and take a stab at that. The importance is to get that diversification beyond just the farm, right? Farmers have diversification within the world they live in, different crops, different personnel, all kinds of diversification. So why not add investments to that diversification? Adding stocks, adding bonds, adding real estate, adding these other asset classes to reduce risk, not eliminate risk, but try to reduce risk of a much larger portfolio.

Paul

Neiffer: And then I think also if you've done a good job of that, it makes it much, not much, it makes it easier to do that transition to the next generation. Because so many of our farmers, they have all their eggs in that farm basket. And then when you try to carve up that farm basket, it creates tax issues, it creates issues on just being able to feel comfortable they have enough retirement income. Whereas if they've, and Mike and I'll go over this, it isn't a lot of money as long as you start at age 20, 25, It can be $5,000 or $10,000 a year, and that grows up to be a very large number when they get ready to retire because we know farmers typically don't retire until mid-60s or even early 70s.

Chris

Barron: Or 80.

Paul

Neiffer: Or 80 or 90 or 100, whatever it might be. So that time really has time value of money. That compounding of interest really builds up very, very quickly in that last 10 or 15 years. 90% of your wealth when you're talking about compounding is really the last 10 years if you start over a 40-year horizon. I think that's one of the key things too, is it makes it much better for transitioning to the next generation.

Chris

Barron: Mm-hmm. One of the whys to that too, I think, is— and I'm going to throw this out there and we'll get to a bunch of details here— but the biggest concern I continue to hear from our clients and prospective clients that call us with questions and want to know things is, you know, labor. It's labor attraction is getting help, number one. Number two is retaining them, right? Okay. I've got this person, he's been here for a year, they're figuring out a lot of stuff, and I don't want to lose them. How do I keep them? Well, our competition provides all kinds of other stuff, right? They, they provide benefits that a lot of times it's just easier just to pay them more. Yeah, well, they don't— a lot of times a typical employee doesn't want just paid more, they want value in other things.

So can you guys talk a little bit about a little bit along the why of, you know, wanting to retain somebody. It's not just about us putting money away or whatever. It's about us providing those opportunities for our employees so we can retain them.

Paul

Neiffer: Well, and I think one of the key things is if you pay somebody, there's no what I call stickiness. You know, if you provide a 401, if you provide a health insurance plan with an HSA account, which we'll talk about, those provide more stickiness. It's a little tougher for that employee to leave because, hey, we got the 401, we got the HSA, you might have some type of cafeteria plan that's really designed for that employee, whereas if you just give them cash, it's very easy for that employee to leave.

Mike

Finley: Sure, and I would add to that, when you give them those benefits, it's, it's also important to educate them on it, right? Educate them on how to use those benefits to the maximum of benefit for them and their families. So, and that's where I see a lot of missteps from many organizations out there. They may even provide some pretty good benefits, but they do a poor job of educating their employees on those benefits.

Chris

Barron: Mm-hmm. Well, and you talk about benefits, just using the word benefits, it's not just a benefit for the employees. There are some tax benefits for the employer as well, Paul.

Paul

Neiffer: You want to hit on that? Especially if you're providing like a 401 plan or an HSA plan, the employer is allowed to deduct that. It typically is never going to be taxable income to the employee upfront. I mean, when they finally retire, there'll be some taxable income, but yeah. And the nice thing about it, there's no payroll taxes on that. That's just another expense like any other expense without having the burden of a payroll tax.

Chris

Barron: It's kind of a win-win, double, it's a double dip win.

Paul

Neiffer: Yeah, we like the doubles and the triples.

Chris

Barron: We don't get those very often. Right. Any additional comments on that? Or another way to throw a question at you, Mike, is how complex is it to get this stuff set up? It's like, you know, a lot of producers listening to this now are trying to spray and side dress and finish summer work, and they're busy. And it's like, you know, it's just like I sat in the office with you today doing some stuff online, and it's frustrating, right? It's sometimes the setting up of this stuff is you kind of decide, like, I don't think I want to do that because I got to go through a bunch of hell to get some of this stuff set up. But once it's set up, it's pretty simple. You want to talk through some of the things, right?

Mike

Finley: So yes, it can be challenging at the beginning, and let's say you do have to put in a few hours to get everything set up in the way that you want it. But what you've done now is put something on autopilot that can last for years or decades. That's going to put you in a much better position financially because you put in those those 2, 3, 4, 5 hours at the beginning to properly set up whatever you need to set up with the benefits that you have.

Chris

Barron: So talk a little bit about the different options or the different things out there, and you guys can banter back and forth, but talk about the different challenges. You guys are pointing at each other, so you guys have to arm wrestle to see who goes first.

Mike

Finley: Well, let's just talk about traditional accounts. So when I say a traditional account, that'd be a traditional 401. It could be a traditional SIMPLE IRA, it could be a traditional SEP IRA, it could also be a traditional IRA, which may or may not apply for very many people. Uh, those money goes in pre-tax, which can be a benefit right up front, but then one day you'll have to pay tax on that money when it comes out. So the idea is for people who are looking at traditional accounts, you believe your tax or taxes are going to be higher now than they will be in retirement. And that may or may not be the case. You're trying to do some estimations on the future, which is hard to do. But then you have Roth. You have Roth accounts. Money goes in after tax, whether that's a Roth 401 or a Roth IRA.

And that money is already taxed at the beginning, but then when it's pulled out years down the road, it's going to be tax-free. And all that compounding of earnings will be tax-free. So, there's a real benefit to Roth accounts. And then the number one retirement plan in America, which, uh, isn't even called a retirement plan, it's called the Health Savings Account. You can put money in pre-tax, traditional, it grows tax-deferred over many years, and then you can pull it out tax-free for medical expenses you had throughout the many years. In other words, you could have medical expenses 20 years past where you kept the receipts to cover yourself as far as any kind of tax audit, and that money can be pulled out 20 years later tax-free for something you spent 20 years earlier.

Paul

Neiffer: Or when you're retired, you can— it can help reimburse your Social Security or your Medicare premiums. You know, there's— yeah, I sort of call it the triple crown of retirement plans because it's, uh, it's the only plan where there's a deduction going in, no tax coming out. There— you can't think of any other retirement plans that allow that.

Chris

Barron: So let me ask this question then. As a farmer or as a business owner, why would you not have an HSA set up then?

Paul

Neiffer: You got to have a health insurance plan that allows it. It's got to be a very high deductible plan. The farmer has to be willing to self-insure to some degree, and I think Christy and I know most farmers really probably do a fair amount of self-insuring anyway. Right. So that really shouldn't be a problem for them, but they just can't have any health insurance plan and set up an HSA. It has to be a health insurance plan that allows an HSA to be set up. So they're going to have to work with their health insurance provider to determine what plans are available.

Mike

Finley: And I would add to that, when you're looking at setting up an HSA, the location of where you hold the money is very important. And one of my favorite is Fidelity. At Fidelity, you can hold an HSA there with no monthly fees. You can invest 100% of your money in stocks, for example. You can treat that like a retirement account. You can actually invest in a zero-cost index fund at Fidelity where there's actually no fees for the investment. So Fidelity is one of my favorite places to hold an HSA for maximum growth over time.

Paul

Neiffer: And again, that's a lot of times that's going to depend on the health insurance plan itself, what HSA options they allow. But I agree with Mike, you know, he had asked me today where I have my money invested, and some's in Fidelity, but most of it's in Vanguard, which again is a very low-cost provider.

Chris

Barron: So I'll ask another question then from a practical perspective. Joe Farmer listening to this podcast, and I'm like, yeah, it all sounds really good, but, um, and I've asked you this question, Mike, in other podcasts that we've done, but who do you get to help you do that? Who do you trust and who do you not trust, and who do you not give money to to help you in that process?

Mike

Finley: Sure. So I would always start with first some self-education. Start learning about this information yourself, because even if you go to someone for help you want to know who to go to. You want to have enough education to ask the right questions when seeking advice. So a fee-only advisor is someone that you could look for advice on. That's someone who is going to charge you a specific fee, maybe a money under management or a project fee or money by the hour, right? And that's it. They do not sell products. You do not want anybody helping you with your finances who are trying to sell products. And that is a large swath of the financial industry, about 95% or so. It's, uh, probably higher than that. I really— because there's a lot of money in it. There's a whole lot of money in selling products.

Paul

Neiffer: There's an incentive. So that's sort of the key, or a conflict of interest, or both. But anytime that there's an incentive to that for that person providing the product to earn extra money, you know, that's probably where you want to sort of drift away from if you can.

Mike

Finley: Mm-hmm. Because how can you be sure that you can trust their guidance when they're making so much money on this product versus that product? So I want somebody who's helping me who has a fiduciary responsibility, who's helping me and they have to serve my self-interest first. And I want to know that they know what they're doing. I want to know their investment philosophy. I want to know exactly where they got their education and how they're going to help me in ways that are going to benefit me the most.

Paul

Neiffer: And, and some people think, well, if I'm paying 1% extra, that's not a big deal, or 2% extra. But if you look at the power of compounding, like if you looked at the compounding at 7% versus, let's say, 5% over a 40-year period that 7% is probably going to be 3 times higher than it was at 5%. People just don't understand.

Chris

Barron: Don't do the math.

Paul

Neiffer: Yeah, don't understand how powerful that extra 1% or that extra 2% is. And, and, you know, Mike's right, you know, Fidelity's got some funds that are 0% on the management fee. Vanguard, others have 0.3 basis points, 0.4 basis points, and you're getting the whole stock market, or quite a bit of the stock market, which is what you want.

Chris

Barron: You talked about fidelity— or not fidelity, you talked about fiduciary, is the word I was looking for. Um, there can be people though that can tell you, I have fiduciary responsibility, and still be costing you a lot of money. Talk about that first.

Mike

Finley: Oh sure, just because somebody is supposedly putting me first, uh, they can still charge me a great deal of money, and exactly what am I getting for that? So fiduciary doesn't mean that you're trustworthy. It doesn't mean that you're ethical. It doesn't mean that you're low cost. It doesn't mean that you're an expert on investment policy. It doesn't mean a lot of things. It just means that, okay, you're going to put me first, but I want to make sure you know what you're doing. I want to make sure I'm getting something of value for what I'm paying you.

Paul

Neiffer: I think you could ask 30 people in the financial industry what the word fiduciary means, you're going to get 29 different answers. And the only reason you got 2 that agreed is because they got together beforehand to say this is what it is.

Chris

Barron: So, right. Well, and Mike, you— in previous podcasts, I think we, we've talked about this, but just for refresher, because I think we all need to hear things about 7 times before it sinks into our mind, right? And so I'm asking again, What questions do you ask a quote-unquote helper that's going to help the listener that's looking into setting up an HSA or a 401 for their employees or themselves or a SEP or whatever? What questions do you ask that helper?

Mike

Finley: So, I'd start with, are you a fiduciary? And let's see what they have to say. If there's any kind of waffling on that, I would get the hell out of there. I'd go find somebody else. So then I'd ask, okay, are you fee-based, which means you could be selling products, you could be making money all kinds of ways, or are you fee-only? Again, if they waffle, if they hem and haw, then get the hell out of there because that— those are not the kind of people you want to be associating with. So once you've identified they're fiduciary and they're fee-only, then you start looking at their investment philosophy. Do they believe in active management? Are they trying to time the market? Are they trying to outsmart others when it comes to investing? Or do they believe in passive investing? So owning passive invested index funds and ETFs.

So those are the ones we want because we know historically those index funds and low-fee ETFs by far outperform managed funds. So we want to make sure that this individual has been educated in the right ways to benefit us the most over time.

Chris

Barron: So just to make sure that there's clarity here, fee-based and fee-only are two different things.

Mike

Finley: They are. And see how close they are? It's very easy to get those things confused, right? So fee-based, you want to avoid. Again, fee-based, all kinds of ways they can make money. You're not even sure how they make money. And when they— good rule of thumb is if they don't actually put out a bill, like charge you, bill you, okay, they're fee-based. They're not— you want a bill, you want a bill, you want to know that this is how much this time is costing me, right?

Paul

Neiffer: And I think sometimes even with fee-based, if they're just providing a service and sending you a bill, that's great. But, you know, a lot of them charge a management fee. So 1% under management. But then there might be a time where, as you get older, maybe an annuity might make sense. I'm not— we're not going to discuss the virtues of annuity, but let's say annuity makes sense. And a lot of those fee-based ones, they're still going to charge a 1% management fee even though they have nothing to do with that annuity. So you still have to be careful as to exactly how are you making your money.

Chris

Barron: And you're not a fan of annuities, are you, Mike?

Mike

Finley: Not so much of the variable annuities and the indexed annuities because of the high fees. But there are many people who might consider an immediate annuity. So an immediate annuity is where you're basically buying a pension. You put together a certain lump sum amount of money, and then you have a promise from the insurance company to pay you a certain amount each month or each year for the rest of your life.

Paul

Neiffer: Okay. Especially if you think that you have some longevity risk, you know, that you might live to 90, 100, 110. Yeah, that's getting more and more common. I was talking to somebody yesterday, his dad's 101, just celebrated his birthday up in Montana. So that's, that's where an annuity sometimes makes some sense, but we're only talking maybe a small portion of your portfolio really at that point.

Chris

Barron: So one of the things that we talked about earlier today kind of offline is that, you know, we do a lot of cost reduction analysis, business planning, business structure. But we've gotten a lot of requests in the last year or two just in transition from like one generation to the next and the importance of that. And I'll start with you, Paul, but is, you know, as people are starting to think about that, in a lot of cases thinking about it too late, probably should have been thinking about that sooner than later. So if you're listening to this and you're 40-something, it's probably time to have that transition plan in place, if not sooner. Yeah. And if, and if you're 60-something and you don't have it in place, get going, right? It's time. I mean, and it's never too late. If you haven't done it, you got to do it, right?

And so can you talk a little bit about some of the, some of the whys behind it, some of the tax considerations, some of the things that, that, you know, are key things?

Paul

Neiffer: Yeah, because one of the issues that farmers have is because of their somewhat unique ability to deduct everything, but they still have debt. They have what we call negative basis, or especially like a partnership operation. So when they're getting ready, they simply, hey, I want to give my share of the partnership over to my son or to my daughter. Well, then they find out they owe half a million or a million dollars in taxes, and that's quite a bit more than they want to pay. So if we have some time, you know, over time we can sort of help mitigate that. Also, if we do have some outside investments that we built up The fact that we need to transfer that quickly really gets reduced.

Narrator: Slows it down.

Paul

Neiffer: Slows it down quite a bit, which that's what we need. We can't eliminate the tax, but we can certainly slow it down. We can reduce the tax burden 'cause it's gonna be at lower rates. Possibly we might even put it into some type of a charitable remainder trust, you know, where we can take advantage of those lower rates, eliminate the self-employment tax burden, And once it goes into a charitable remainder trust, it can be invested for the benefit of the farmers. So there's lots of options. And when you said in the 40s, actually my personal preference is you're, you are starting on your succession plan the day you start farming, right? You know, you're, you're mentally preparing a plan that says 30, 40, 50 years from now I'm getting out and here's the things I don't want to do now. And here's are the things that I want to do.

Chris

Barron: And, and all the reasons for diversification, like Mike started out talking about, of having some other diversification because they're, you know, as farmers we don't like paying taxes. We're probably the one industry that bitches the most about having to pay tax, probably over any other industry.

Paul

Neiffer: That's a very low hurdle to get over because it is true.

Chris

Barron: Yes, right, right. And, and so with that said though, there's a lot of tax advantages to You know, setting up that SEP or a SIMPLE or a 401 or whatever, that is in addition to all of the other mechanisms that as farmers we have available to us from a tax management standpoint. That's just another layer of additional savings that should be a motivational reason.

Paul

Neiffer: Yeah, so the farmer could, let's say, set aside $50,000 into a 401 plan, or they could put $50,000 into some piece of equipment. You know, if we look at 40 years from now, that piece of equipment is going to be worth what, Chris? Zero. It's been traded in 17 times already.

Chris

Barron: Unless it's a 4020, then it's worth— Exactly.

Paul

Neiffer: You know, exactly.

Chris

Barron: Yeah, it's worth what we paid for it, but it doesn't— but you lose out on all the inflation.

Paul

Neiffer: But that $40,000 that we put, or $50,000 that we put into a 401 plan, in 40 years it's going to be worth potentially $300,000, $400,000, $500,000, $600,000. And if it's 50 years, it could be worth $3 million, you know. So, uh, that's the power you're putting. You want to put your money into assets that are going to grow, not assets that are going to depreciate.

Mike

Finley: And I would just add to this, we're talking about long-term planning. I think that long-term perspective is critical to this whole issue, that we don't just think about today. We're making decisions that are going to serve us best for the long term, and that includes our family members.

Paul

Neiffer: And, and to some degree, you know, the best advice we can give people if they start young and they're, they're continuing to put money in every single month, you know, let's say they're putting in $500 a month, sometimes the best advice we can tell them is don't look at that statement for 40 years. Don't look at the market, don't look at CNBC, and invariably you're going to be better off because you're continuing to dollar cost average. You're getting that money in there, you're allowing that compounding to work.

Chris

Barron: So let me ask this question. Mike and I kind of had an off-topic, kind of, well, sidebar conversation earlier this morning. We were kind of talking about you, and Mike, you asked about like working capital, like what, what amount of working capital is sufficient for the farmers. And we're in a, in a period of time now, you know, in the middle part of 2021 as we record this, or excuse me, 2022. I'm a year behind. 2022. And gonna have a pretty good year. I think most farm operations are. We came off of '21, most farm operations improved working capital. There's going to be, I think, another large working capital improvement again for a lot of farm operations that are listening to this. And, you know, '23 may be also a decent year because if you look at where commodity prices are at, even though inputs are high, there's, there's margin there.

We're running the numbers already and seeing that. Mike, you asked the question, okay, how much working capital? I'm gonna throw this out because I don't know if you were listening to us earlier, Paul, but, you know, my, my comfortable zone for working capital is if you can get through half of the year without borrowing any money. In other words, if you, if you need a million dollars, yeah, if you need a million dollars to operate and you've got $500,000 worth of liquidity available, working capital, cash that can can get you to that point, then that's probably sufficient. But less than that starts to flip on a yellow light for me. Like, if it's a green light, yellow light, red light, that's flipping the yellow light on. And you get below about 20%, the red light's starting to flash.

Paul

Neiffer: It's not flashing, it's constant, right?

Chris

Barron: Right. And so, um, I think the question I want to ask then is, okay, let's say that farm operations are at that level, they've got 50%, let's say they got 60, 70%. I know some— we have some clients that are sitting there with 100%. How much are they leaving on the table having that cash there as inflation is a consideration, interest rates, and where they could put the money to have it working for you as opposed to be sitting there? What makes you guys comfortable? I'll ask you first, Paul, and then Mike. What makes you guys comfortable on the available liquidity, quote unquote, working capital and then the rest of it should be working for you.

Paul

Neiffer: Well, I think I would agree with you. Somewhere in that 50% range is a very, very manageable number. Uh, it used to be 35%, but I think with the rapid increase in inflation, I'd be more comfortable in the 50% range right now. Uh, above that, uh, you know, if you stick it in the bank, you're getting 0.001. Now maybe it'll start going up a little bit, but, uh, you know, whereas you could deploy that. And the other thing too is we're not necessarily talking about retirement plans. You know, that's one of the tax advantages, but we could be having a taxable account. Having a taxable account at Fidelity or Vanguard or wherever where you're building up wealth there is still good. I sort of call it the three-legged stool. You got your retirement plan stool, you got your investment stool, and then you have your farm stool. And we want all three of those legs to be fairly well developed.

So, but yeah, I'd be right in that 50%. Now it's a little different, let's say, for dairy or a livestock operation, but certainly the row crop operation, that 50% is a good number.

Mike

Finley: Mm-hmm. Sure. And I can't argue with that. What I would say is once you hit that threshold, it's time to do something else with that capital. Don't let it keep piling up, earning little to nothing. And I see this with individuals just with their emergency savings, right? You can build up savings and savings and savings earning almost nothing. And inflation is eating it up. It may make you feel safe, but it's not safe. There's an inflation risk that's affecting your cash. So putting that money in a brokerage account beyond the retirement accounts can be an effective way to grow that money over time where it's still liquid, it's still money that is available to you at any age, but it's growing. It's, it's hopefully staying ahead of inflation. And again, you can do that with stock index funds. Historically, they have returned 7% beyond the inflation rate.

Paul

Neiffer: And I think one other thing that we forgot to mention that can be powerful for farmers is that a retirement plan is usually exempt under bankruptcy or creditors. So if you get $500,000 or $1 million or $2 million into a 401 plan, that means if something happens God forbid something happens to the farm operation, you know, you're going downhill, you're going down there, you're protected. You're always going to be available to have those funds. The creditor can't go after them in bankruptcy or any other way. So, and that's at the federal level. So I would say farming can be dangerous both from a physical standpoint and from a financial standpoint. And this is a way, especially if you start early, you can build up that fortress, so to speak, that they can't go after.

Chris

Barron: Yeah, because the converse of that, I've heard people say, and I hear this from lenders too, is you can't— like, because we look at a lot of balance sheets, right? And you can't put your retirement equity on a balance sheet from an ag lender. They're, they're not even going to look. I mean, put it on there, but it's going to get crossed off because they don't mean anything. They can't get a hold of it if something happens.

Mike

Finley: Yeah, I think that's a very valuable point. It's incredibly important to understand what he just said. You are protecting a certain amount of your balance sheet that they cannot touch.

Chris

Barron: Yeah, and, and it comes back to one of the things I think you said. So I've read all your books now, Mike, so, um, I, I would recommend if people haven't started reading your books, they need to. And, and, you know, I think it was you said, you know, pay yourself first, right? That's a prime example of paying yourself first, you know. Whether it's quarterly or monthly or, you know, once a year at the end of the year, the farm has a good year and you can take $20,000 or whatever, plow that into that retirement account. You know, don't just think we got to buy land. We do need to buy land, we do need to do the things for the farm, we got to replace equipment, but there's some tax advantages to doing that at the end of the year too, right Paul?

Paul

Neiffer: Yes, yes. And the nice thing about a retirement plan contribution is you actually can fund it after a year in and still get the deduction on the current year. You have, with an IRA, a regular IRA, you have until April 15th, but with any 401, SEP, and so on, you have all the way until the due date of your return, which could be October 15th. So that does give you some—

Chris

Barron: On an extension.

Paul

Neiffer: On an extension, that does give you some flexibility.

Mike

Finley: Yeah, and I would add to the whole issue, you just said need. You know, we— farmer may say, I need land. Well, I would say you need other investments. I don't think it's a nice thing to have. I, I think it is a need. And I think if we start prioritizing it in that way, we're going to start building those accounts up.

Chris

Barron: Yeah. And ironically, I would say probably of the listeners— this is an estimate, Paul, you can correct me if you think my estimate is off— but it's probably the 80/20 rule. I bet 80% of the people listening to this either are not that motivated to diversify into other investments off the farm because, quote unquote, you need the cash. Back to the need thing, right? And, um, it's just that it's not a motivational thing, you know. It's not as much fun to put money in the stock market as is to update a planter or a tractor or something or whatever, you know, if there's some tax advantage to it. Plus we can go ahead and stay more current with that stuff.

Paul

Neiffer: I need to probably be looking at this other stuff. I I think that's true of the generation more of our age, but I think the younger generation, I think they've been more educated and understand the value. Now they have to go ahead and do it, but I just get the feeling that the younger generation is more willing or seeing it more, seeing it, they're more eager to put the money in. Now, if we're talking crypto or some of this other stuff, I'm not sure on that, but that'd be a whole different conversation we can have.

Chris

Barron: But what about the motivation for a 60-something? What's wrong with a 60-something that— I mean, if they're going to farm till they're 80 anyway, why not start throwing some, you know, because they, they get into a position where they do have extra cash and there'd be some tax advantages instead of buying a new sprayer or whatever. Maybe, and not that you couldn't do that, do that too, but also maybe look at, okay, you can, you could start any of these things at any age, right?

Mike

Finley: Well, Chris, you talk about legacy. And I would add your investments as a legacy. So, for example, if you were to choose Vanguard to hold your Roth IRA, your brokerage, maybe a 401, by investing there for years and leaving that money there, we know that the vast majority of children and grandchildren end up investing wherever that money is left to them. So if you leave money in stock and bond index funds at Vanguard, it's likely your family will be investing in the future in stock and bond index funds at Vanguard. So you can build a legacy that your family members may not even realize you did, but you put them on autopilot to increase their wealth over time simply by where you left their money.

Chris

Barron: Yeah.

Paul

Neiffer: And addressing the one question you had, you can open at any time. You can have an IRA anytime as long as you have earned income, but a retirement plan, typically there's a cutoff age either 70.5 or 72 depending on how the SECURE II Act finally goes through, if it does go through. But you got to be careful with that if you're the more than 5% owner, which most farmers would be.

Chris

Barron: Yeah, and part of that, Paul, is You've been a good go-to for us as a CPA that understands all the rules too. And, you know, we talk about, you know, fee-based versus fee-only and all that kind of stuff. And a lot of it's just understanding some of the rules on, you know, having a good CPA and somebody that can kind of give you some good advice that's doing your taxes anyway, right?

Narrator: Yeah.

Paul

Neiffer: But I'm always willing to say when I don't know it because, you know, if anybody says they know all the rules, no, they don't.

Chris

Barron: But typically you can find it out though. I mean, that's the key thing.

Mike

Finley: Exactly. Well, and it's about surrounding yourself with the right people, people that are really serving your interest first, and, and that's key as you start to go through your life and select the right people along the way.

Chris

Barron: One, one of the— as we get towards wrapping up here, one of the other things I wanted to bring up, and you guys talked about it offline earlier today, I heard you guys kind of mention it, we talked a little bit about retirement, and it's not just the financial part, but it's also the the, um, the transition of your life and your happiness and all that kind of stuff. Um, you guys want to hit on that a little bit? I think that's important. And I don't know who wants to go now.

Mike

Finley: You guys— so I'll start with this idea that— so I wrote Graduation, it's my third book, and graduation's my term for retirement. And it's, it's graduating to something. I think that's key. You don't just want to leave something, you want to graduate to something that you want to do. That there's a purpose to your days. And so, this idea that you just retire and lay on a couch, that's not any kind of solution. I encourage people to start finding other interests that they can start really digging into. And in many cases, maybe sliding into retirement rather than just dropping off a cliff. You gradually leave one phase of your life, and you start entering another phase. And that can be a little easier transition for many.

Chris

Barron: Well, part of this— our, our recreation is driving tractors, and our, our fun is driving tractors, and our, you know, fun is going to a tractor pull. Or, you know, I mean, literally, it's— it is a big transition for a lot of producers because what they do is produce and So I think one of the things, and, and you kind of mentioned it too, Paul, the— this generation or the younger generation, maybe the 40-under group, is kind of— do have maybe some hobbies or some things that they do.

Paul

Neiffer: They have a little better work-life balance, I think, compared to my generation or the generation before us.

Narrator: Yeah.

Chris

Barron: And I don't think that that's bad, it's just we all grew up differently. And I think from a generational standpoint, it's just important that we respect each other, understand each other, and You know, I tell a lot of, um, 40-somethings that dad keeps coming back to the farm, or even 50-somethings that dad's come, keeps coming back to the farm and either micromanaging or complaining about something or kind of tipping the table over once in a while and saying, why aren't we doing this instead of that? You know, is just being understanding of, you know, they still want to just be involved. You can still listen, and we just got to be respectful both ways, I think.

Paul

Neiffer: Yeah, but then you guys have fun driving tractors and combines on flat ground. I have fun driving off a cliff, basically.

Chris

Barron: Yeah, so yeah, yeah, yeah, you're what, you're, you're, uh, hill—

Paul

Neiffer: 45% slopes are pretty common.

Chris

Barron: So you can slide pretty good on 45.

Paul

Neiffer: Yeah, I think I've slid about 250 feet's the longest I've slid.

Chris

Barron: So yeah, yeah, well, we're going to get Mike in a tractor here in just a little bit so we get him, uh, So that's one thing I would, I will mention right now too, and then we'll finish up here. But you guys are both going to be presenters at the conference that we're going to have in, and we'll be announcing the specific location here in the next week or two, but in January 25th, 26th, 27th, our second annual Executive Ag Business Conference. Looking forward to that.

Paul

Neiffer: So, and it will be warmer than Iowa or Washington State in the wintertime, so we know that.

Mike

Finley: Yes, and I'm excited for that, and I'm excited to be able to reach more of those farmers, some in-person communications, and helping people see maybe just a little different way of looking at not only their finances but their life.

Chris

Barron: Yeah, yeah, the Ag View Executive Business Conference. I get in trouble from Shay when I don't say it right. The Ag View Executive Business Conference, second one next year, January 25th, 26th, 27th. So Mark your calendar if you don't have it marked. And so with that said, last question, um, what other things, or what one key thing or two key things do you think that's important that a farmer walks away from listening to this podcast, what do they need to really be thinking about that they can apply to their business? I'll let either one of you go first.

Paul

Neiffer: Well, and Mike mentioned a little bit too, is pay yourself first. You know, be very consistent about paying yourself, setting it aside. Just get started.

Chris

Barron: Even if you have a bad year. Yeah, even if you lose $100 an acre, take your, your $30, $50, $40, whatever it is, and put it in your retirement account.

Paul

Neiffer: Exactly, exactly. And, and it— if, if, if really things get bad, you can always take some of it out. I would never recommend that, but it's still available there if it really got that bad, right?

Mike

Finley: Yeah, that's liquidity. So my, my little finish here would be, you are the answer. That's my message to the individual. If you're going to put yourself in the right place financially, it's not going to be coming from a politician or some other individual outside of your home. It's going to come from you. It's that person in the mirror who's going to make the real difference in their lives. So now is the time to take full responsibility not only for your money but for your life.

Chris

Barron: Awesome. So if anybody, any listeners want to get a hold of either you guys, start with you, um, Paul, what's the best way to reach you?

Paul

Neiffer: A couple, uh, I probably prefer the email, so paul.neiffer, so paul.neiffer@claconnect.com. They can also call me on my cell phone, 509-961-9739, but I would certainly recommend that they take a look at the blog farmcpatoday.com.

Chris

Barron: That sounds good. And, and you're, you're kind of my phone friend. Always.

Paul

Neiffer: I've, I've to say, I've, I've had that call many, many times.

Chris

Barron: Yeah. Yeah. Because we're in the midst of a lot of transition stuff with a lot of clients and you've been a savior in a lot of that. So we really appreciate it, Paul.

Paul

Neiffer: Thank you.

Mike

Finley: Just reach out to me at thecrazymaninthepinkwig.com. Thecrazymaninthepinkwig.com. Hard to forget that. You can Google me. Got all kinds of videos out there, and the website will help you not only reach me but help you understand many of these topics when it comes to money and life.

Chris

Barron: That's awesome. And you guys have helped me a lot. You've helped our farm operation a lot. We're in the midst of, you know, setting up a 401 for our employees, and, and, um, it's been a, um, it's been an interesting challenge to do some of the stuff when you're online and trying to get stuff set up. But once things are set up, like you said, you get things on autopilot. I think it's really cool to to do what we can do for our employees, for retention, for attraction, and, and making our businesses grow and be stronger. And that's the whole goal of the Ag View Pitch, is we want to bring good information and good guests. And if anybody has other requests or anything, let us know. And we'd like to thank everybody for listening. Again, Paul, thank you. Mike, thanks.

Mike

Finley: You're welcome. Thank you.

Chris

Barron: You bet. Thanks everybody for listening, and we will catch you again next time on the Ag View Pitch.