| The federal tax law, known as the Revenue Reconciliation Act of 1993, has an impact on passive income which affects most retirees. Virtually all retirees are affected due to Social Security benefits. In addition, the Act has especially noteworthy consequences for those retirees who can shift assets used as production inputs for generating earned income into assets used for passive income. Thus, retiring farmers who own relatively large amounts of land, may especially be in a position to take advantage of the federal tax changes of 1993.;While it is true that in the retirement plans of most Americans, Social Security constitutes one of the major sources of income, other sources of retirement income include the private assets owned by individuals, as well as any pension plans. The Social Security Act was signed into law in 1935 during the Great Depression, with additions made to the law later. For example farmers became eligible to participate in the system in 1954. There are important economic considerations in retirement for farmers, involving timing, federal taxes, and farm structure. In this analysis, stochastic simulation is used to determine the optimal potential annual retirement income of sole proprietor cotton and peanut farmers. The retirement income for the farmer could be composed of Social Security benefits, income from pre-retirement investments, rental income and any annuity income available from selling assets. |
