To ensure financial security in older age, create a sustainable retirement income plan, adjust investment portfolios to be more conservative, and protect assets against fraud. Key actions include reducing debt, diversifying investments, delaying Social Security to age 70, establishing a durable power of attorney, and reviewing long-term care insurance. 

Essential Financial Security Actions

• Plan and Consolidate: Develop a clear plan for your investment portfolio, setting aside 3–5 years of cash flow to avoid selling assets during market downturns.
• Maximize Social Security & Retirement Accounts: Consider delaying Social Security payments until age 70 for higher, or 132% of, the regular payment. Maximize contributions to 401(k) plans, IRAs, and look into tax-saving Roth conversions in your 50s and 60s.
• Adjust Portfolio Risks: Shift towards more conservative investments, such as a mix of stocks and bonds, to minimize potential losses. Use diversified, low-cost investment options like target date funds.
• Protect Assets and Estate: Establish a durable power of attorney, create a will, and consider a health care proxy (medical POA) to ensure your finances are managed by a trusted person if you cannot.
• Manage Debt and Costs: Review your debt and create a plan for managing it in your later years. Evaluate the need for long-term care insurance to protect your savings from high, unexpected health costs.
• Avoid Scams and Fraud: Protect against financial exploitation by avoiding shared personal information and being cautious of speculative, high-risk investments.
• Seek Advice: Consult with a CPA or financial advisor to customize your strategy. 

Financial Security for Older Americans

The U.S. retirement system, and the workers and retirees it was designed to help, face major challenges. The Social Security Old-Age and Survivors Insurance Trust Fund that supports retirement benefits is projected to be depleted in 2033, under current law, and continuing payroll taxes will be sufficient to pay only about an estimated 79% of scheduled benefits, according to the 2024 Social Security Trustees Report. Participation in employer-sponsored retirement plans hovers at about half of the total private-sector labor force, despite tax incentives and initiatives like automatic enrollment. 

Even for those who do have access, traditional defined benefit pensions have become much less common as defined contribution plans, such as 401(k)s, have become the primary type of retirement plan. This shift has increased the risks and responsibilities for individuals in planning and managing their retirement. Yet research shows that many households are ill-equipped for this task and have little or no retirement savings.As of 2022, about half of households with a worker age 55 and older had no retirement savings, and 32% had no retirement savings or a defined benefit plan. Policymakers will need to consider how to best encourage expanded pension coverage, adequate and secure pension benefits, and more effective use of tax preferences to foster workers’ retirement security.

Retirement Resources for All Households Age 55 and Older, 2013-2022

Note: Retirement savings include assets accrued in defined contribution plans, such as 401(k) plans, as well as individual retirement accounts (IRAs).

Policymakers and federal agencies—such as the Department of Labor (DOL)—can better help individuals ensure financial security for themselves and their families as they enter their retirement years. 

For example: 

• Social Security. Social Security is a major source of income for millions of retirees and other Americans. As program costs continue to exceed revenues, the fund that supports payments for retirees and their families is projected to be unable to pay full benefits in less than 10 years. The sooner policymakers address the financial challenges, the more gradually changes can be phased in. This would give workers more time to adjust to any changes and factor them into retirement plans. Additionally, being able to evaluate these changes for their effect on program finances, adequacy and equity, recent societal changes, and ease of implementation, as well as understanding the range of changes available, will help policymakers determine which changes best reflect our country’s goals for Social Security.  
• 403(b) retirement plans. Millions of teachers and employees of tax-exempt organizations invest in 403(b) retirement plans. DOL provides educational materials to 403(b) plan sponsors and participants. However, the agency’s website does not provide the same level of detailed information regarding 403(b) plans as it does for 401(k) plans. For example, the website does not contain targeted educational materials that could help participants understand 403(b) plan fees. Updated DOL information on 403(b) plans could help participants make more informed decisions. 
• Fees for 401(k) plans. DOL requires 401(k) retirement plans to provide information on plan and investment fees to participants. Even small fees can significantly reduce retirement savings. But almost 40% of participants do not fully understand fee information, and 41% incorrectly believe that they pay no fees. DOL could help participants better understand and use fee information by, for example, requiring plans’ fee disclosures to include fee benchmarks (an average fee among comparable funds) for comparing investment options. DOL could also take steps to provide information about fees’ cumulative effects over time. 
• 401(k) retirement plan tax notices. After separating from an employer, plan participants are sent a 402(f) notice that has some information on distribution options—like rolling over funds—and the tax consequences of cashing out funds from old plans. But only about a third of participants received this notice before they decided what to do with their retirement savings. About 80% of participants weren’t aware of all their distribution options. To ensure plan participants receive easily-understandable information about all four distribution options and the associated tax consequences at the time they leave their job, DOL could help plans develop clear and concise communications to inform participants. 
• Target date funds (TDFs). TDFs are the most widely used investment option in 401(k) plans and they allocate assets over time based on participants’ targeted retirement dates. TDFs hold more in higher risk investments when participants are younger and shift to lower risk investments as they approach retirement. DOL developed guidance in 2010 for participants (and in 2013 for plan sponsors) to help them understand these and other key features and risks of TDFs. However, this guidance doesn’t include recent developments, such as the increase of TDFs structured as collective investment trusts. Without updated guidance, plans sponsors and participants may experience challenges identifying and understanding disclosures for collective investment trust TDFs. DOL should update its guidance with more recent information to help plan sponsors and participants better understand fund disclosures and risks. 
• EBSA enforcement. The Employee Benefits Security Administration (EBSA) helps ensure that employer-sponsored retirement and group health plans comply with applicable federal requirements and that benefits are there for participants as promised. While EBSA’s responsibilities have increased in the last decade, its budget has generally remained flat. EBSA officials said the agency has several strategies to manage this—such as focusing resources on high-impact investigations and dedicating supplemental funds toward maintaining staff. But it doesn’t have a clear and systematic process to reallocate resources. A clear, systematic, and thoroughly documented decision-making process could put EBSA in a better position to make informed decisions regarding resource reallocations due to changing circumstances. 
• Conflicts of interest. The interests of financial professionals and retirement investors often conflict. For example, a financial professional may earn a commission from selling a product to a client—whether it makes money for the client or not. A review of 2,000 conflict disclosures and calls posing as potential clients to 75 financial professionals found many complex conflicts that can be difficult to explain. Additionally, mutual funds that paid financial professionals were associated with lower returns for investors. IRS should develop and implement a proactive process to identify prohibited transactions between IRA fiduciaries and IRAs and assess any associated excise tax.

Essential money tips for your 60s and 70s.

You’ve spent decades building financial security, and you’re probably doing just fine. But as life changes, so do the best ways to manage and safeguard your money. Whether it’s embracing modern technology or staying aware of financial scams, small changes can make a big difference.

If you’re in your 60s or 70s, now is the perfect time to take a fresh look at your finances.

Discover how banking is now easier (and safer).

Are you still making trips to the branch for simple transactions? You don’t have to. Commerce Bank offers mobile deposit, allowing you to snap a photo of a check with your cell phone and conveniently deposit it instantly.

Did you know that wire transfers are no longer the only way to electronically send money to someone else’s bank account? If you need to send money to a friend or family member, peer-to-peer (P2P) payment apps like Zelleopens in a new window^® let you send and receive funds conveniently — typically within minutes. The benefits of using a P2P app go beyond convenience, it’s also safer than carrying cash or mailing checks.

Navigating these and other financial tools for the first time can feel intimidating. But some banks offer step-by-step guidance to help you get comfortable in your ability to use them well. For example, Commerce Bank’s mobile messaging lets you interact with a real person for one-on-one assistance.

Ask questions.

Whether it’s about taxes, Social Security benefits, or the Medicare program, asking questions can save you money and reduce stress. For example, the IRS offers free tax assistance through programs like Tax Counseling for the Elderlyopens in a new window (TCE), designed specifically for people over 60. Similarly, Social Security offices and Medicare counselors can clarify benefits and help you make informed decisions. Keep asking questions, because policies and programs often change.

Adjust your investment strategy.

Your financial priorities may have shifted since you retired. What worked well in your 40s or 50s might not be the best strategy today. Many retirees move toward lower-risk investments to protect their savings from market swings. If you haven’t yet, it may be time to review your portfolio with a financial advisor and discuss:

• Reducing exposure to high-risk investments
• Ensuring your savings can provide a steady income
• How required minimum distributionsopens in a new window (RMDs) from retirement accounts affect taxes

An annual financial check-in can help you stay on track and alert you to needed adjustments.

Manage healthcare costs.

Healthcare is one of the biggest expenses in retirement, and costs can be unpredictable. Even with Medicare, out-of-pocket expenses like copays, prescriptions and long-term care can add up. Consider the following:

• Are you enrolled in the best Medicare plan for your needs? Plans change every year, and reviewing your options during open enrollment ensures you choose the best plan for your situation.
• Do you know how you’ll cover long-term care costs? Medicaid, long-term care insurance, or a health savings account (HSA) might be worth looking into.
• Are you taking advantage of prescription savings programs? Many pharmacies and organizations offer these benefits, but you have to ask about their availability.

Sign up for Medicare news and updates to receive tips that can help you save on healthcare expenses.

Watch out for scams.

Unfortunately, financial scams targeting older adults show no signs of slowing down. Scammers are getting more sophisticated, often pretending to be a federal or state agency employee, family member, or even your bank. Some red flags include:

• Unsolicited phone calls asking for financial account information or money.
• Emails or texts with urgent requests to verify your account or pay a bill.
• Investment opportunities promising unusually high returns.

When in doubt, don’t respond. Hang up or delete the message. You can always call the organization directly using their official contact number to verify if the communication was legitimate.

Sign up for AARP Watchdogopens in a new window email or text alerts about the latest scams.

The financial world is constantly changing. Speak with a Commerce banker today for personalized guidance on how to best protect your money and gain peace of mind.

Not that long ago, people looked forward to retirement as a time of relaxation and leisure when one might travel the world or take up a new hobby. Increasingly, however, people preparing to retire are doing the math and realizing that the future doesn’t look so bright financially. The following 10 guidelines will help you enjoy a more comfortable retirement even in an uncertain economy.

1. Have a Plan, But Stay Flexible

Retiring successfully takes planning. Take an honest inventory of your assets, savings, investments, and set some goals for your retirement. Consider what you’d like to be doing, where you’d like to live, who you want to be near, and what kind of lifestyle you prefer.

While you need a plan, you also need to be flexible and open to unexpected changes. Keep yourself informed about the latest developments in areas such as the cost of living, tax laws, investments, real estate trends, and other areas that are likely to have an impact on your life.

2. Watch Your Spending

Overspending is a common mistake for many retirees. The paradox about not working is that you have less money coming in but more time to spend your money. It’s natural to want to fill up all your free time with eating out, shopping, traveling, and other leisurely pursuits. It’s important to set a budget and stick to it. You don’t have to cut out all entertainment and treats. However, make sure you don’t spend beyond your means.

3. Find New Sources of Income

It’s an unfortunate fact that people in the United States and many other countries are postponing retirement because they can’t afford to stop working. Some employees, meanwhile, are forced into retirement. There are, however, alternatives besides working full-time and complete retirement. Here are a few possibilities.

• Get a part-time job. This can be good to keep you active and earning money.
• Start a business. There are many businesses you can start from home, from selling items on Amazon or eBay to providing freelance services.
• Make money from your property. If you have extra space, you might rent out a room or set up an Airbnb.

4. Get Out of Debt

Reducing or eliminating debt is one of the best ways to improve your financial situation. Debts are especially draining after you retire. Do whatever you can to cut down on what you owe, especially high-interest debts such as credit cards.

Paying off debt provides two main benefits. On the one hand, it reduces the burden of making high payments when your income may be decreasing. Additionally, you have a chance to improve your credit score which is useful if you want to apply for a mortgage, business loan, or another type of loan in the future.

5. Don’t Touch Your Retirement Account Early

Withdrawing money from your retirement account early may be tempting but it’s seldom a financially wise decision. You also incur tax penalties if you take money out of an IRA or 401K before retirement age (currently 59.5). If you’re thinking about raiding your retirement account, make this an absolute last resort. A few years from now, you’ll be glad you held out.

6. Downsize Your Lifestyle

For most people mortgage, rent, utilities, and other home-related costs are their highest expenses. Consider how much space you need and whether it might be practical to downsize. If you have your own home, you could sell it and buy a smaller one or relocate to an area with a lower cost of living. Renting or moving to a condo helps you cut down on home maintenance costs. An extreme way to reduce your cost of living is to retire to a country with very cheap living expenses such as Ecuador or Panama.

There are other ways to downsize and simplify your lifestyle aside from housing. Could you manage having one car instead of two? Or consider moving to a location where you don’t need a car. With ride-sharing services and short-term rental options, more people are finding that owning a vehicle is an unnecessary expense.

7. Take Care of Your Health

Medical expenses are one of the biggest reasons people fall into financial difficulties later in life. Aside from getting regular checkups, pay attention to your habits and lifestyle.

Bad habits tend to catch up with you when you can least afford it. Eating a healthier diet, exercising regularly, and avoiding harmful substances will make you feel better, while also saving you money on healthcare costs. You can also manage medical expenses by researching the most advantageous health insurance options.

8. Invest Wisely

It’s never too late to start investing or to improve your investing strategy. Generally, you should invest more conservatively as you approach retirement.

Diversifying your holdings is the best strategy. Spreading investments among small and large-cap stocks, bonds, mutual funds, and real estate trusts increases your chances of reaping steady returns. An annuity can provide you with predictable payouts after you retire. If you need help, consult with a CPA or investment advisor.

The other side of the coin is to be wary of dubious investments. Older people are often targeted by scam artists selling fraudulent “investments.” Even legitimate investments that are highly speculative such as futures, Forex, and cryptocurrency carry significant risks. Make sure the bulk of your holdings are in more stable assets before you start speculating.

9. Don’t Be Overly Generous

Many older adults are victims of their own generosity. As younger people face rising housing and education costs, they sometimes turn to their parents and grandparents for help. While it’s great to help your kids buy a home or pay for your grandchildren’s college tuition, make sure you don’t overextend yourself. Before you give away large sums, consider the future and ask yourself how this will impact you 5 or 10 years from now. Sometimes you just have to say “no” even if it’s painful.

10. Take Advantage of Senior Discounts

There are many financial advantages to being a senior (though the exact definition differs depending on the situation i.e. it may be 55, 60, 62, or 65). If you’re not a member of AARP, join now and learn about more benefits. Your local public library is also another good place to learn about programs. Before spending money on anything, from healthcare to travel to transportation, find out if you can get a discount based on your age.

These are some ways to help you manage your finances when you retire and even before. It’s important to look at your situation and devise a workable strategy. People get into trouble when they live day-to-day and ignore impending problems.