Retirement planning by Dutch farmers: rationality or randomness?

Research output: Contribution to journalArticleAcademicpeer-review



– In self‐directed retirement plans, farmers are responsible for selecting the types of risky investments toward which the funds in their retirement plan are allocated. Furthermore, farmers do not necessarily purchase sufficient annuities with their savings upon retirement. There is little empirical evidence on the level of income sought or obtained. The purpose of this study is to analyze the long‐term investment behavior with respect to retirement planning.


– Two types of data were merged for the analysis: data from the Farm Accountancy Data Network (FADN) cross‐sectional dataset, and subjective data collected by a questionnaire survey. A response rate of 39 percent was achieved enabling analysis of 440 farm records. By means of regression analysis, the impact of subjective elements, for example level of income sought, as well as farm structure and financial farm characteristics on income obtained at the time of retirement were revealed.


– By decomposing the underlying decision alternatives, it was shown that the long‐term investment behavior differed substantially among farmers, but the alternative decisions made were hardly affected by structural and objective parameters. The current study reveals the dilemma faced by any farmer who has the option to invest in his own business. Off‐farm retirement investments simply provide an alternative destination for investible funds and it is a rational decision to invest these funds in their own business, thus making the farm itself their retirement “nest‐egg”. However, a discrepancy between the level of income sought and obtained was found.

Research limitations/implications

– There is a need to study how farmers can be encouraged to use existing options for obtaining a more comprehensive retirement plan.

Practical implications

– In the investigated case, farmers are entitled like all residents to receive retirement benefits provided by the state, referred to as state pension. The use of three alternative retirement plans complementing the state‐sponsored retirement benefits is investigated. Perceptions about whether or not the state pension was sufficient to rely on as the sole source of income did not affect participation in a retirement plan. This stresses the importance that the contributions made and assets reserved should be regularly evaluated and reviewed (via, for example, extension or internet tools) to ensure that the available capital will meet the future income sought.


– It is a challenge to identify the adequacy to attain retirement readiness by self‐directed investment plans. The strategic choices to be made are complex, while the outcome is risky. In the current study, the long‐term investment behavior with respect to retirement planning is analyzed by decomposing the underlying decision alternatives.
Original languageEnglish
Pages (from-to)365-376
JournalAgricultural Finance Review
Issue number3
Publication statusPublished - 2010


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