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CapitalPress.com
Maximize Re�rement Income
by L. Jake Carpenter, VP Investor Rela�ons
I have seen the following scenario play out �me and
�me again. I want to offer you some valuable nuggets
that can help you avoid common mistakes in re�re-
ment planning. I meet good people, who have worked
hard for many years. Now they are ready to slow down
and try to exit their business, farm, or rental property,
but they find themselves backed into a corner. For in-
stance, consider the farmer who has been working the
farm for the last 40 years. Though the kids and grand-
kids work on the farm, they have no desire to take it
over for Mom and Dad. The farm is worth $5 million
and it’s genera�ng a gross income stream of $100,000
a year. Another way to say it is their $5 million dollar
farm asset is genera�ng a 2% gross return.
Dad and Mom at age 65, have reached a stage in life
where they are either no longer able or no longer
desire to work the farm. If they were to lease the farm
ground, the return on the asset is even lower, then if
they work the farm themselves. And a 1031 Exchange
isn’t suitable since they don’t want to sell the farm and
buy another one. So, they decide to just sell the farm.
Using our scenario as an example, here are some
points to consider. First, Dad and Mom purchased the
Friday, March 4, 2022
farm 40 years ago for $350,000, now it is worth $5 mil-
lion. Second, since they’ve owned the farm for so
many years, their deprecia�on schedule has been
exhausted. This means the income from the farm is no
longer tax-advantaged, so 100% of the farm income is
subject to ordinary income tax. This also means that all
of the $5 million dollar sales proceeds are unfortunate-
ly subject to capital gains tax and poten�ally deprecia-
�on recapture which together equals about 40% of the
sale. In this case it equates to a $2 million dollar tax
bill.
Dad and Mom sell the farm, and put the net sales
proceeds, $3,000,000, in their checking account. Then
they ini�ate their plan to take out $100,000/year to
live on. Now here’s another point to consider. When
factoring in infla�on, at a very conserva�ve rate of 4%,
Dad and Mom will run out of money in 20 years. So, if
they live past 85 years of age, they will have exhausted
their income. How many people do you know that are
older then 85? Did you know the fastest growing popu-
la�on in America are those turning 100?
Here is a be�er plan. Before you sell the farm, work
with someone who has the tools, like Equilus Capital
Partners, to build a strategy that will allow you to sell
the farm and put the tax bill back in your pocket. There
are strategies that defer capital gains tax, like using a
1031 Exchange, only they allow you to diversify the
sales proceeds into a passive posi�on in income-
producing real estate, as well as into conserva�ve
stocks, bonds, and mutual funds. One of the benefits
of being in a passive posi�on in real estate is that you
don’t have to deal with the trash, toilets, and tenants.
Your funds should be managed to produce a target
income that outlives you. U�lizing this strategy, you
can take a por�on of the interest income every year
and put more spendable income in your pocket. Our
proac�ve strategy takes infla�on into considera�on
and allows for your income to increase every year at
4%.
If Dad and Mom had taken this route, by the �me
they are 95 years old, they could poten�ally be taking
over $580,000 a year in income and s�ll have an
investment account balance of approximately $5 mil-
lion a�er 30 years.
This is a great illustra�on of the possibili�es, de-
pending on your individual situa�on. Our goal is to
come along side of you to build and implement strate-
gies that will maximize your a�er-tax spendable in-
come and allow you to do the things that maybe you
were not even aware that you could do. Set up your
consulta�on today and become equipped to make
op�mal decisions by knowing all of your op�ons.
Avoid common mistakes, call today: (509) 665-8349.
EquilusCapital.Com
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