Preparing for retirement isn’t just a phase in one’s life; it’s an aspect of adult life that many spend years working on. Two financial veteran experts are sounding the alarm on a “double threat” to long-term financial security: Brigette Engstrom, founder of Blue Monarch Financial, and Stephen Dissette, investment advisor representative with Horter Investment, offer key information to keep in mind on the pathway to retirement.
Both financial experts ultimately offer tips, which they refer to as a ‘legacy protection checklist.’
Engstorm discussed the concept of the “seed versus harvest” analogy to highlight the tax implications of 401k plans. She explained that failing to pay taxes on contributions now results in higher taxes at retirement due to required minimum distributions (RMDs). Essentially, she said how Americans love the notion of a 401k, paying in money over time and letting it grow, yet she explained how the “seed harvest” analogy shows what is really occurring with one’s finances.
“I either pay the tax on the 60 kernels I originally bought, or I haul in my entire harvest and pay tax on every single kernel. That’s essentially your 401(k): you either pay tax on the seed now, or you pay it on the much bigger harvest later,” she said.
She continued, “And at some point the IRS stops asking; they send a letter requiring you to start withdrawing money whether you need it or not. That’s your required minimum distribution.”
She also emphasized the importance of tax planning, particularly for those aged 55 to 72, highlighting strategies like Roth conversions and Social Security claims at optimal ages.
“Ages 55 to 72 are your tax‑planning sweet spot. That’s when you need real help deciding if a Roth conversion actually makes sense and when to claim Social Security, because those choices can lock in your tax bill and your income for the next 20 years.”
She also stressed the need for diversified income sources and proper tax evaluation to avoid overpaying taxes. Engstrom’s approach aims to protect and maximize retirement savings, advocating for informed financial planning.
“Retirees have saved diligently for decades. The IRS has built a system to collect on every dollar in IRAs, and it’s a mechanical system that’s working exactly as it was designed to do — it’s not bad luck. The more educated people become, and the more they participate in their planning, the less likely they are to show up unprepared. They’ll know what to expect and be able to take advantage of the incentives that are out there for them.”
Dissette explains that a common misconception is that Medicare has the ability to cover long-term care, which elders tend to need, especially during the later years of their lives. He says that Medicare doesn’t cover costly long-term custodial care and stresses proactive retirement planning.
“A lot of people are under the myth that Medicare or their own health insurance will cover long‑term care. It is not the case at all. That is a separate category altogether… you could easily be spending a half million dollars just to cover a long‑term care situation.”
He further added, “Most people don’t transition into a pre‑retirement and retirement portfolio. There’s a significant difference. The first half of your working life is about ‘grow, grow, grow your wealth.’ The second half should shift from pure growth to protecting your assets and generating enough income to last the rest of your life.”
Also, Dissette suggests people look into hybrid annuities (“tripler” and “doubler”) and HSAs (Health Savings Account) for tax-advantaged long-term care funding. He also highlights risks like taxes, market volatility, longevity, and inflation and urges working with independent fiduciary advisors to help retirees with comprehensive retirement plans.
For more information about retirement and other financial services, please visit Stephen Dissette’s website at https://www.stephenddissetteandassociates.com/. Also, for more information about finances, taxes, and retirement, please visit Brigette’s company website at https://bluemonarchfinancial.com/our-team/
