Retirement and Succession Planning of Farm Households: Results from a National Survey

Results from a National Survey Most farm households control a substantial amount of wealth. In 2001, U.S. farm households had average net worth of $545,869, compared with $395,500 for non-farm households (Mishra et al.). Failure to plan carefully for retirement and transfer of the estate can result in serious problems such as financial insecurity, personal and family dissatisfaction, and unanticipated capital losses. Intergenerational transfers can be classified by their timing, into the forms of transfers and bequests (Altig and Davis, 1992). They can also be classified by type, into the forms of physical capital and human capital (Nervlove et al., 1984). Physical capital can be further classified into liquid and illiquid assets. This last classification is particularly interesting when the relatively illiquid assets are indivisible and when they constitute a large fraction of family wealth. Examples of this type of asset are the productive assets owned by self-employed individuals or family businesses. In family farms, the farm itself constitutes a physical asset that is highly illiquid, indivisible to a large extent, and in most cases constitutes a large fraction if not all of family wealth. Many studies have shown that even when farming cannot provide the family with an adequate standard of living, farmers refrain from selling farm assets and try to supplement their income fro