Farm Horizons
•
Feb. 8, 2016
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Page 8
Are you financially ready for retirement?
It is now after Jan. 1, you are sitting with
Why should you put money into a retireyour tax-preparer doing your farm tax rement
account?
Myron Oftedahl
turn, and you learn that you will have a
First, will Social Security income be
Farm Business
Management Instructor,
much larger tax bill than you were anticienough for you to retire on?
South Central College
pating.
Secondly, the practice of selling the
Now what do you do?
farm and buying a house in town doesn’t
Fortunately, you still have a couple of
work well if you consider the capital gains
options to manage that tax liability.
taxes involved and the effect of inflation.
But, first, let me say that it is OK to pay some taxes. That
Thirdly, we are living longer. When Social Security was
means that you had a profitable year.
Secondly, at least part of that tax liability is for self-employment taxes or Social Security.
So, if you want to have a decent amount due to you from
Social Security when you retire or are old enough to start
drawing Social Security, you need to pay in.
I also recommend that you pay in at least one quarter
every year, so that you maintain your disability coverage
should you need it.
Now, what can you do about the income tax liability since
it is past Jan. 1 and you can’t do any more prepayments?
You still have a couple of options, and both involve putting money into a retirement account. You may put up to
$5,500 into an IRA if you are under 50 years of age, and up
to $6,500 if over 50 years of age. You may also put money started, the average life span was 65 years old and the averinto an SEP account, which often has a higher limit because age payments from Social Security was three months. Now,
it is a percentage based on income.
our life expectancy is approaching 90 years old. So, if you
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