Farm Ireland

Tuesday 16 January 2018

Retire safe in knowledge money can grow on trees

Joe Barry

Joe Barry

Providing for our old age is something we tend not to think about until it's almost too late to take action. Even in middle age, many view retirement as something that only happens to other people.

However, a pension is vital to secure financial independence and provide a spot of comfort after a lifetime of working.

Farmers, of course, rarely retire, much to the frustration of their sons and daughters, but the facts remain that whatever our profession, our earning capacity usually diminishes as we grow older. One has to be careful though, for supposedly safe investments can vanish into thin air.

The bank shares that I, and many of my friends, own are proof of this. But there is no profit to be had in continuing with the blame game. We, ourselves, are responsible for our actions, so let's learn from the past and just remember our futures are in our own hands.

I never liked the concept of relying on someone else to make financial decisions for me anyway. We are perfectly capable of making our own mistakes rather than paying some consultant to make them for us.

But before investing for a pension, talk to an experienced and qualified professional such as a trustworthy accountant. Then make up your own mind.

As the current recession progresses, the worth of conservative, safe investments continues to shine -- and if something is being offered that promises exceptional returns then it could well be a scam. Financial history is a good guide and it repeatedly tells us to avoid whatever everyone else is buying.

Houses, land, shares and the more exotic assets such as art or postage stamps all come in and out of fashion with extraordinary regularity.

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House property is being shunned at present and some housing in certain areas does still appear expensive relative to the cost of building, but farm land is rising in value, due in part to a fear of the euro collapsing or the possible introduction of some 'Punt Nua', which may be worth substantially less than the euros we now hold.

A good mixed portfolio is always best and that can include livestock and land which have stood the test of time but, in addition, forestry keeps confirming its worth as a safe, sound investment, now and for the future.

Along with worries about the value of our currency, there is the fear of a return of inflation.

We are living in an era of mild deflation, even if this is not reflected in the official figures.

Many items such as motor cars and electrical goods are considerably cheaper than they were before the recession -- but of course this cannot last. If the euro devalues or we are forced to adopt a currency of our own, then everything we import will immediately jump in price.

Coupled with this is the scary manner in which Europe and America are printing money to keep their banks solvent. If you print more money you devalue that which is already in circulation and this inevitably leads to inflation.

Inflation erodes the value of our savings and anyone who remembers the 1970s will recall how virtually everything shot up in price, leaving elderly people with cash savings worth a fraction of what they were a decade earlier.

But this is where it becomes a bit complicated, for despite the damage that inflation does it is probably the only politically acceptable means of reducing our mountain of national debt.

This also applies to those economies that are far larger than ours so, sooner or later, inflation will return and, with it, our debts will devalue, but solid assets like land, precious metals and woodland should hold their value in real terms.

It is very important to keep up with your PRSI payments to ensure you qualify for the State contributory pension. Many farms show a loss every few years or so and are therefore not liable for tax in that year. But those who omit to pay PRSI may end up ineligible for any State pension due to their capital assets.

Do also consider investing in forestry. If you plant trees in middle age, you will have an additional pension from timber sales when you are ready to retire.

After 20 years, the State pension can replace the premium income and you will have the sales of thinnings and the final crop to look forward to along with the added bonus of your own fuel to warm the home.

Indo Farming