Engineer to Potato farmer? What are retirement options?

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Topic Author
searle7
Posts: 18
Joined: Mon Feb 26, 2018 3:15 pm

Engineer to Potato farmer? What are retirement options?

Post by searle7 » Fri Jul 12, 2019 5:54 pm

Hello All!

I'm looking for some advice. I work as a project engineer for a food company in a LCOL (Idaho). Last year I came across bogleheads and have been trying to get my financials in order since then. About 6 months ago my company underwent a major management change and since then things have been uneasy with many people getting fired. It's been a wake up call for me so I have been diligently working to build up my 6 month emergency fund just in case I get laid off. I am still investing 6% into my 401K to get a 3% match from my employer. See stats below.

Age: 31
Salary: $78,000
Married with 2 kids and 1 more on the way; Spouse is SAHM
Debt:
- Mortgage $140k @ 3.25% with 27 years left
- Car loan: $7,000 at 3%
- Car loan 2: $3,500 at 3.5%
- Heloc: $6,800 at 5.5%

Assets
Home value: 275K
Roth: Vanguard target fund(VFIFX); $2,500
401K: $22,000
Emergency fund: $10,000; Ally savings at 2.1%

I haven't been happy with my current job and have started looking for a new job. However, there aren't many job opportunities here in east Idaho for engineers. My father and 2 brothers own a potato farm with about 1,200 acres. Next year one of their main hired hands will be retiring and my dad and brothers have asked if I would like to join the farm. I would become part owner (part of an llc) as well. Farming is a risky business but the lifestyle is fantastic. However they don't offer any retirement benefits. On paper I should probably get another engineering job but the opportunity to jump on the farm is tempting right now. I want to join the farm but don't want to be ruined financially if the farm goes belly up.

- What are some retirements plans we could start on the farm? We do have other employees but probably can't offer retirement benefits to the normal employees.
- If the farm goes bankrupt, can they seize my retirement accounts?
- Am I dumb to join the family farm?

As a side note; my dad took out a whole life insurance on his mom (cost is $40,000 per year!) and that is his retirement plan. My grandma is also well off and he should receive a significant inheritance. I'm not planning on receiving any inheritance when planning for my retirement.
Thanks!
Last edited by searle7 on Fri Jul 12, 2019 6:03 pm, edited 1 time in total.

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Wiggums
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Re: Engineer to Potato farmer, retirement options

Post by Wiggums » Fri Jul 12, 2019 6:03 pm

Term insurance is better than whole life.

How does the farm pay and benefits compare to your current job. They might help you make this decision. As a single earner, you really need a good emergency fund no matter what job you have.

Topic Author
searle7
Posts: 18
Joined: Mon Feb 26, 2018 3:15 pm

Re: Engineer to Potato farmer, retirement options

Post by searle7 » Fri Jul 12, 2019 6:08 pm

Wiggums wrote:
Fri Jul 12, 2019 6:03 pm
Term insurance is better than whole life.

How does the farm pay and benefits compare to your current job. They might help you make this decision. As a single earner, you really need a good emergency fund no matter what job you have.
I agree that term is better. I was just stating the fact in case someone wanted to know how my dad planned on retiring. The pay is about equal but currently they have no 401k setup or anythings. My brothers have nothing saved for retirement! I agree about the emergency fund. My goal is $20,000 ($10,000 to go). I should have the emergency fund funded by early next year at current rate.

Smoke
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Location: Saturn

Re: Engineer to Potato farmer? What are retirement options?

Post by Smoke » Fri Jul 12, 2019 6:13 pm

Although I can't help with the financial aspect you are asking for, I would strongly suggest evaluating the "Family" dynamic and how you fit in.
Farms split up, who takes over as the head if needed.
It's harder to quit a family than a job.
Wife get along with the family, and willing to grow spuds?
Just some other than $$$ ways to think about.
Arguing for the sake of arguing is something I am not going to engage in.

btenny
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Re: Engineer to Potato farmer? What are retirement options?

Post by btenny » Fri Jul 12, 2019 9:44 pm

From what little I know about farming this sounds like too many bosses (one Dad boss and three sorta boss brothers) and not enough workers for 1200 acres. It probably would work a lot better with only one brother and your Dad and some workers from a profit and income basis. And maybe your Dad needs to train up one of his current workers to replace his retiring person. So IMO if you go to work there no one will make very much money even in good years and it will be very very bad in poor years.

So I say no for now. And I suggest you update your resume and look around for other job opportunities.

Good Luck.

Spirit Rider
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Re: Engineer to Potato farmer? What are retirement options?

Post by Spirit Rider » Fri Jul 12, 2019 10:15 pm

searle7 wrote:
Fri Jul 12, 2019 5:54 pm
What are some retirements plans we could start on the farm? We do have other employees but probably can't offer retirement benefits to the normal employees.
Possible retirement plan types are SEP IRA, SIMPLE IRA and 401k. All eligible employees must be allowed to participate and receive any employer contributions from all plan types, but specific eligibility varies. In other words, you can not discriminate against your normal employees.
If the farm goes bankrupt, can they seize my retirement accounts?
No, retirement accounts are held in trust for you.

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BL
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Re: Engineer to Potato farmer? What are retirement options?

Post by BL » Fri Jul 12, 2019 10:37 pm

Sometimes you have to follow your dreams. But I have the same mentioned concerns as well as seeing that you have debts to clean up: 2 cars, HLOC, as well as most of your mortgage. So none of you have backup funds for emergencies. Borrowing money would be the only option. Remember, rates could eventually go up into the double digits like they were in the '90's and more. That expense takes up a huge part of your income.

There is also personal risk here: joining with the family group as an outsider, especially if your spouse is not integrated into your family already. Working together can be way different than just being together. How does your spouse feel about this? Would she be willing to work so you would have reasonable health insurance?

Have they showed you the financials? What about the land and equipment? Would you be expected to buy in, or forego any appreciation of the land if it eventually goes out of business? Is there acceptable reasonable housing nearby?

Please consider everything so you make a judgement based on facts, not dreams. It could be a great place to live, but other places can be great, also.

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Watty
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Re: Engineer to Potato farmer? What are retirement options?

Post by Watty » Fri Jul 12, 2019 10:46 pm

searle7 wrote:
Fri Jul 12, 2019 5:54 pm
However, there aren't many job opportunities here in east Idaho for engineers.
There might not be a lot of companies that are hiring but just for brainstorming have you considered starting your own business? I am far removed from it but I have read some interesting articles about how technology is being used in agriculture in all sorts of ways from drones, high tech satellite controlled tractors, GIS systems, etc. You might be able to find a niche that no one else is doing in your area.
searle7 wrote:
Fri Jul 12, 2019 5:54 pm
My father and 2 brothers own a potato farm with about 1,200 acres. Next year one of their main hired hands will be retiring and my dad and brothers have asked if I would like to join the farm.
If you join them then in effect the four of you would at best more or less be like one person with a 300 acre farm which may not be large enough to support your family.

Topic Author
searle7
Posts: 18
Joined: Mon Feb 26, 2018 3:15 pm

Re: Engineer to Potato farmer? What are retirement options?

Post by searle7 » Sat Jul 13, 2019 10:46 am

BL wrote:
Fri Jul 12, 2019 10:37 pm
Sometimes you have to follow your dreams. But I have the same mentioned concerns as well as seeing that you have debts to clean up: 2 cars, HLOC, as well as most of your mortgage. So none of you have backup funds for emergencies. Borrowing money would be the only option. Remember, rates could eventually go up into the double digits like they were in the '90's and more. That expense takes up a huge part of your income.

There is also personal risk here: joining with the family group as an outsider, especially if your spouse is not integrated into your family already. Working together can be way different than just being together. How does your spouse feel about this? Would she be willing to work so you would have reasonable health insurance?

Have they showed you the financials? What about the land and equipment? Would you be expected to buy in, or forego any appreciation of the land if it eventually goes out of business? Is there acceptable reasonable housing nearby?

Please consider everything so you make a judgement based on facts, not dreams. It could be a great place to live, but other places can be great, also.
I already live in the same city so no moving would be required. I know these brothers very well from growing up with them on the farm and have worked with them in the past. Of course it does make me nervous as working with family can ruin family relationships. You make a good point about interest rate as the farm operates on a operating loan which would now also be in my name. The loan is very large as in several million dollars. The risks are very large but working on farm doesn't even seem like a job. My current job is very unfulfilling and I think my job fulfillment would increase dramatically on the farm.

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laughlinlvr
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Re: Engineer to Potato farmer? What are retirement options?

Post by laughlinlvr » Sat Jul 13, 2019 11:03 am

Happy to learn that I'm not the only Boglehead living in eastern Idaho amongst the potato fields.
My understanding of retirement accounts (you need to research to find out if this is still accurate) is that you can fund various IRAs on your own. Even a regular IRA can have more than the regular employee-limited contribution if the employer has no retirement plan in place. As for the advantage of a 401k; there is no inherent advantage over an IRA. However, 401k's often come with employer contributions (although there is no legal requirement for an employer to do so). My understanding is that IRA retirement funds are exempt from being counted as assets in the discharge of a bankruptcy. However, your home may not be.

Prior to a bankruptcy, many small businesses scrape the bottom of the barrel looking for cash in order to keep operating. How will you fare in such a pressured environment? Particularly if you do not want to contribute? Are you sure the arrangement being offered is one of employment? This would leave you with zero corporate liability. Reading your OP it seems a partnership is being offered. If that is the case you need legal advice, and this possibility has not featured in your writing.
Investing - The hardest way to make an easy living.

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onthecusp
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Re: Engineer to Potato farmer? What are retirement options?

Post by onthecusp » Sat Jul 13, 2019 11:37 am

Can you split your attentions? As a project engineer you have skills applicable to just about any industry including farming, farm related service companies, silo operators, trucking firms, etc. Stop thinking about food processing equipment and focus on steel, tanks, foundations, and project management. Even if you are out of engineering for awhile, you should be able to come back to a similar situation as what you could find now.

As the junior partner in a family business you may be able to come to agreement with your brothers about farming as primary responsibility but also keeping your hand in engineering. I suspect you would need a PE licence to do this on your own.

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ruralavalon
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Re: Engineer to Potato farmer? What are retirement options?

Post by ruralavalon » Sat Jul 13, 2019 1:44 pm

searle7 wrote:
Fri Jul 12, 2019 5:54 pm
Hello All!

I'm looking for some advice. I work as a project engineer for a food company in a LCOL (Idaho). Last year I came across bogleheads and have been trying to get my financials in order since then. About 6 months ago my company underwent a major management change and since then things have been uneasy with many people getting fired. It's been a wake up call for me so I have been diligently working to build up my 6 month emergency fund just in case I get laid off. I am still investing 6% into my 401K to get a 3% match from my employer. See stats below.

Age: 31
Salary: $78,000
Married with 2 kids and 1 more on the way; Spouse is SAHM
Debt:
- Mortgage $140k @ 3.25% with 27 years left
- Car loan: $7,000 at 3%
- Car loan 2: $3,500 at 3.5%
- Heloc: $6,800 at 5.5%

Assets
Home value: 275K
Roth: Vanguard target fund(VFIFX); $2,500
401K: $22,000
Emergency fund: $10,000; Ally savings at 2.1%

I haven't been happy with my current job and have started looking for a new job. However, there aren't many job opportunities here in east Idaho for engineers. My father and 2 brothers own a potato farm with about 1,200 acres. Next year one of their main hired hands will be retiring and my dad and brothers have asked if I would like to join the farm. I would become part owner (part of an llc) as well. Farming is a risky business but the lifestyle is fantastic. However they don't offer any retirement benefits. On paper I should probably get another engineering job but the opportunity to jump on the farm is tempting right now. I want to join the farm but don't want to be ruined financially if the farm goes belly up.

- What are some retirements plans we could start on the farm? We do have other employees but probably can't offer retirement benefits to the normal employees.
- If the farm goes bankrupt, can they seize my retirement accounts?
- Am I dumb to join the family farm?

As a side note; my dad took out a whole life insurance on his mom (cost is $40,000 per year!) and that is his retirement plan. My grandma is also well off and he should receive a significant inheritance. I'm not planning on receiving any inheritance when planning for my retirement.
Thanks!
Most here hold W-2 jobs, and have never been self-employed or been a part owner of the company they worked for. The difference requires a different way of thinking.

There are retirement plans for small companies and the self-employed.

How many employees does the farm LLC have?

Here are three possibilities: a SEP IRA, SIMPLE IRA, or individual (solo) 401k. Vanguard, small-business plans,"Compare plans". That link has a nice table comparing the features (like contribution limits, amount of paperwork required, etc.) of the three types of plans.

Both Fidelity and Schwab also offer the same types of plans. Fidelity "Retirement plans for small businesses ". Schwab, "Small business retirement plans".

The College Investor (12/11/2017), "Comparing The Most Popular Solo 401k Options".

The Bogleheads' wiki has articles on each type of plan. Boglehead's wiki, "SEP IRA". Boglehead's wiki, "SIMPLE IRA". Boglehead's wiki, "Solo 401k Plan".


A fourth possibility is a small company 401k provider. Small company 401k providers which have been favorably mentioned here are:
Employee Fiduciary;
Guideline; and
Ascensus.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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