ANALYSIS OF SAVINGS, OFF-FARM INVESTMENT, AND TAX-DEFERRED RETIREMENT ACCOUNTS OF FARM HOUSEHOLDS

• Sponsoring Institution: Economic Research Service/USDA
• Project Status: TERMINATED
• Funding Source: USDA INHOUSE
• Reporting Frequency: Annual
• Accession No.: 0406360
• Project No.: 0406360
• Project Start Date: Jul 11, 2001
• Project End Date: Sep 30, 2006

Project Director
Mishra, A.

Recipient Organization
USDA/ERS
1800 M STREET NW
WASHINGTON,DC 20036

Performing Department
ECONOMIC RESEARCH SERVICE

Non Technical Summary
Farmers are influenced by the same factors that affect savings in other sectors of the economy such as age, education, and other socioeconomic attributes. Savings play a direct role in maintaining a standard of living from year to year. In addition to precautionary savings, farm households devote resources to farm and non-farm investments to accumulate and store wealth for future needs.

Animal Health Component

(N/A)

Research Effort Categories

Basic

(N/A)

Applied

100%

Developmental

(N/A)

Classification

Knowledge Area (KA)	Subject of Investigation (SOI)	Field of Science (FOS)	Percent
602	6020	3010	100%

Knowledge Area
602 - Business Management, Finance, and Taxation;

Subject Of Investigation
6020 - The family and its members;

Field Of Science
3010 - Economics;

Keywords

savings

retirement

economic analysis

investments

wealth

farm families

agricultural economics

households

family income

taxes

family members

consumer behavior

economic factors

economic evaluation

life cycle

family resources

resource allocation

resource management

real estate

economic policies

decision making

economic returns

social economics

Goals / Objectives
This projected is focused on identifying factors that affect the saving and investment behavior of farm households. Particular emphasis will be on participation in tax-deferred retirement plans. Life-cycle position and other attributes influence how farm families choose to allocate capital among competing farm and non-farm uses. Many farm households, in planning for retirement, consider a range investment opportunities beyond accumulated equity in farm real estate. These decisions change the composition of the household portfolio and expand policy interest from traditional agricultural policy to a broader array of economic and tax concerns. In addition to identifying the key factors that motivate differences in capital allocation decisions, this research will determine how differences in investment decisions ma affect both the distribution of income earned by the farm business and the level and stability of income and investment returns earned by farm households.

Project Methods
The study will use data collected in the 1999 ARMS on farm and off-farm investment of farm households.Household assets will be decomposed by type of asset class to examine the structure of household's portfolios. Multivariate and other statistical analyses approaches will be used to examine factors that effect household decisions.

Progress 07/11/01 to 09/30/06

Outputs
The research under this project is being consolidated with the project, Indicators of Farm Household Wellbeing.

Impacts
(N/A)

Publications

• Mishra, A., Morehart, M., 2001, "Off-Farm Investment of Farm Households: A Logit Analysis", Agricultural Finance Review, 61 (1), pp. 87-101.

Progress 10/01/02 to 09/30/03

Outputs
Most farm households control a substantial amount of wealth. Research showed of operators who indicated plans to retire, 22 percednt reported their intent to rent their farm to another household while 20 percent reported that they would sell their business, generating cash for other uses by the household. Twenty six percent of operators reported that they would turn over management of theirfarm to another partner or family member, while retaining some ownership interest.

Impacts
(N/A)

Publications

• Mishra, A., Morehart, M., 2001, "Off-Farm Investment of Farm Households: A Logit Analysis", Agricultural Finance Review, 61 (1), pp. 87-101.

Progress 10/01/01 to 09/30/02

Outputs
1)Completed a descriptive analysis reported in "Farm Families' Savings: Findings from the ARMS Survey." Agricultural Outlook April 2002. An analysis of tax-deferred retirment savings of farm households was completed for presentation. National farm-level data and a Double-Hurdle estimation method were used to examine the tax deferred retirement savings of farm households. Results indicate that household's income, education and age, regional location and size significantly affect investment in tax-deferred savings. 2) Prepared a paper for NC-221 meetings in Kansas City, MO, October 2002.

Impacts
(N/A)

Publications

• Mishra, A., Morehart, M., 2001, "Off-Farm Investment of Farm Households: A Logit Analysis", Agricultural Finance Review, 61 (1), pp. 87-101.