MONEY second careers

How to Tap into Your Creativity to Build a Second Career

JamesRicePhotography.com Jazz guitarist Bucky Pizzarelli, 89, at left, with Ed Laub, 62.

Who says innovation peaks in your 20s? Some artists reach their prime in their 50s, 60s, 70s, and 80s.

When we lived in Bremerhaven, Germany in the early 1960s, my younger sister and I eagerly shared the Little House series of books by Laura Ingalls Wilder. The first one, Little House in the Big Woods, was published when the author was 65.

For the 50th anniversary of his class of 1825 at Bowdoin College, Henry Wadsworth Longfellow wrote a poem (Morituri Salutamus) which ran through a list of giants who did great work late in life—Cato, who learned Greek at 80, Chaucer, who penned The Canterbury Tales at 60, and Goethe, who completed Faust when “80 years were past.” Longfellow, then 68, exhorted his aging classmates to not lie down and fade. No, “something remains for us to do or dare,” he said.

For age is opportunity no less
Than youth itself, though in another dress,
And as the evening twilight fades away
The sky is filled with stars, invisible by day.

The assumption that creativity and gray hair is an oxymoron is a widely held stereotype. What’s more, the notion that creativity declines with age is deeply rooted, but it’s also deeply wrong. Anecdotal and scholarly evidence shows overwhelming that creativity doesn’t fade with age—or at least it doesn’t have to.

Launching Innovative Second Careers

University of Chicago economist David Galenson has taken a systematic look into the relationship between aging and innovation, discovering that many famous artists were at their creative best in their 60s, 70s and even 80s.

Galenson’s favorite example: artist Paul Cézanne, who died at 67 in 1906. Cézanne was always experimenting, always pushing his art, never satisfied. Thanks to his creative restlessness, the paintings of his last few years “would come to be considered his greatest contribution and would directly influence every important artistic development of the next generation,” wrote Galenson in Old Masters and Young Geniuses: The Two Life Cycles of Artistic Creativity.

The same holds for many others, including Matisse, Twain and Hitchcock.

“Every time we see a young person do something extraordinary, we say, ‘That’s a genius,’” Galenson remarked in an interview with Encore.org, a nonprofit helping people 50+ launch second acts for for the greater good. “Every time we see an old person do something extraordinary we say, ‘Isn’t that remarkable?’ Nobody had noticed how many of those old exceptions there are and how much they have in common.”

One of those “remarkable” people is Ed Laub, 62, a seven-string guitarist in New Jersey who plays with famed jazz guitarist Bucky Pizzarelli, 89. (Pizzarelli’s bass player is 95.) I caught up with Laub after a weekend gig in St. Louis and Denver and before the group took off to play in Miami.

Playing guitar is a second career for Laub. His grandfather was a founder of Allied Van Lines and Laub worked for some three decades in the business, alongside his father.

Laub started taking lessons from Pizzarelli when he was 16. When he neared 50, Laub realized that what he really wanted to do was play guitar full-time. His parents had passed away, so he sold the business in 2003 and began teaming up with Pizzarelli. They now perform about 100 times a year in all kinds of venues—auditoriums, jazz clubs, private parties and a regular gig at Shanghai Jazz, a Chinese restaurant/jazz club in Madison, N.J.

Laub told he me has used his business acumen to boost their pay. “What I found out is many creative types have no idea how to manage a business,” he said. “No matter how creative you are, if you do it for a living, it’s a business.”

Boomers Taking Career Risks

My suspicion is the old-aren’t-creative stereotype is a major factor behind the rise in self-employment among boomers. Many people in their 50s and 60s are eager to break away from their jobs if management won’t give them the opportunity to exercise their creative muscles.

Barbara Goldstein, 65, of San Jose, Calif., gets her creative juices flowing by promoting artists. She’s an independent consultant focused on public art planning with clients including the California cities of Pasadena and Palo Alto. “I have as many ideas, if not more, than I did in my 20s and 30s,” she said. “What happens over time is you learn things and you become much more effective in the work you do.”

Goldstein noted that with age, you realize if you want to get something done, you have to go for it—there’s no point in waiting because time is precious. To further broaden her horizons, Goldstein is a fellow at the Stanford Distinguished Careers Institute, a new, one-year program helping older professionals think through the next stage of their lives.

“If you’re always doing the same thing it’s hard to be creative,” she says. (Incidentally, if you know someone 60 or older who’s just now doing great encore career work, nominate him or her for Encore.org’s 2015 Purpose Prize.)

Economists Joseph Quinn of Boston College, Kevin Cahill of Analysis Group and Michael Giandrea of the Bureau of Labor Statistics have found a sizable jump in recent years in the percentage of people who are self-employed in their 50s and 60s. “Older workers exhibit a great deal of flexibility in their work decisions and appear willing to take on substantial risks later in life,” they wrote. And, I’d add, they’re creative.

What can you do to stay creative in your Unretirement years?

  • Don’t isolate yourself. Be willing to engage with people from diverse backgrounds and of different ages, as Goldstein does.
  • Try something new, experiment, take a leap. That’s what Laub did, going from moving van boss to professional guitarist.
  • Go back to school to pick up new skills.
  • And when someone disparages older people for their lack of creativity, tell them about Cezanne and Matisse.

With time, the Unretirement movement will demolish yet one more stereotype holding people back.

Chris Farrell is senior economics contributor for American Public Media’s Marketplace and author of the new book Unretirement: How Baby Boomers Are Changing the Way We Think About Work, Community, and The Good Life. He writes twice a month about the personal finance and entrepreneurial start-up implications of Unretirement, and the lessons people learn as they search for meaning and income. Send your queries to him at cfarrell@mpr.org or @cfarrellecon on Twitter.

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MONEY Social Security

Why Defending Social Security Needs to Be Next on Obama’s To-Do List

House Republicans voted to block a financial fix to Social Security's disability trust fund, which runs out of money in 2016. That would result in a 20% benefits cut.

Since the midterm elections, President Obama has taken decisive action on immigration reform, climate change and relations with Cuba. Now, the new Republican-controlled Congress has handed him another opportunity to act boldly—by leaving a legacy as a strong defender of Social Security.

House Republicans signaled this week that they are gearing up for a major clash over the country’s most important retirement program. In a surprise move, they adopted a rule on the first day of the new session that effectively forbids the House from approving any financial fix to the Social Security Disability Insurance (SSDI) program unless it is coupled with broader reforms. That would almost surely mean damaging benefit cuts for retirees struggling in the post-recession economy.

Republicans see an opening for benefit cuts in the SSDI trust fund. It is under severe financial pressure and on track to be exhausted at the end of 2016, when 11 million of the most vulnerable Americans would face benefit cuts on the order of 20%.

The rational solution is a reallocation of resources from Social Security’s Old-Age and Survivors Insurance Trust Fund (OASI). Such reallocations have been done 11 times in the past, and funds have flowed in both directions. Shifting just one-tenth of 1% from OASI to SSDI would extend the disability fund’s life to 2033.

Instead, House leaders appear to be maneuvering to push through an SSDI fix during the lame duck session following the 2016 elections. Such an 11th-hour package would likely impose cuts to the retirement program, including higher retirement ages and reduced annual cost-of-living adjustments. Legislators wouldn’t have to explain a vote for benefit cuts to their constituents before the elections, and might avoid accountability if changes to Social Security get tacked on to an omnibus spending bill or other yearend legislation.

“I don’t know why this had to be done on Day One,” said Cristina Martin Firvida, director of financial security at AARP. “It makes it much less likely that we’ll deal with the disability problem until the lame duck session—and that won’t provide a good result for American taxpayers.”

Critics say the disability program is rife with fraud, and out-of-work baby boomers too young for retirement benefits are freeloading by getting disability benefits. There’s no doubt that a program the size of SSDI is subject to some abuse, or that reform may be needed.

But SSDI’s real problems are less sensational. They include more baby boomers at an age when disability typically occurs and more women in the labor market eligible to receive benefits. Meanwhile, the increase in the full retirement age now under way, from 65 to 67, adds cost to SSDI, as disabled beneficiaries wait longer to shift into the retirement program.

This throwing down of the gauntlet should send a loud, clear signal to Democrats: It’s time to reclaim your legacy as the creators and defenders of Social Security. A small number of progressive Democrats have embraced proposals to expand benefits, funded by a gradual increase in payroll taxes and lifting the cap on covered earnings, but most Democrats have been spineless, mouthing platitudes about “keeping Social Security strong”—a pledge that could mean just about anything.

Expansion is not only doable financially—it has overwhelming public support. A poll released last fall by the National Academy of Social Insurance found that 72% of Americans think we should consider increasing benefits. Seventy-seven percent said they would be willing to pay higher taxes to finance expansion—a position embraced by 69% of Republicans, 76% of independents and 84% of Democrats.

Congressional Republicans are way out of step with Americans on this issue, and so is the White House. The administration has been all too willing to flirt with benefit cuts as it chased one illusory “grand bargain” after another.

But the unbound Obama now has an opportunity to stiffen and redefine his party’s resolve on Social Security. The president should propose expansion legislation. Democratic presidential and congressional candidates should run on Social Security expansion in 2016 and work to assure that reform isn’t tackled in an unaccountable lame duck vote.

In 2005 a young Democratic senator sized up Social Security politics during the debate over President George W. Bush’s plan to privatize the program:

“[People in power] use the word ‘reform’ when they mean ‘privatize,’ and they use ‘strengthen’ when they really mean ‘dismantle.’ They tell us there’s a crisis to get us all riled up so we’ll sit down and listen to their plan to privatize …

“Democrats are absolutely united in the need to strengthen Social Security and make it solvent for future generations. We know that, and we want that.”

That senator was Barack Obama of Illinois.

Read next: Why Illinois May Become a National Model for Retirement Saving

MONEY Social Security

How Younger Spouses Can Get the Most from Social Security

Ask the Expert Retirement illustration
Robert A. Di Ieso, Jr.

Q. I was born in 1953 and will turn 62 this August. My projected Social Security benefit is $1,488 at age 62 and $1,974 at 66. My total family benefit ceiling is $3,508. My wife was born in 1970 and has never paid Social Security payroll taxes. She will begin working part-time this year but will probably never earn enough credits to claim her own retirement benefit. Our daughters are 14 and nearly 13.

I’m figuring that it is most advantageous to start my benefit at 62. I’m wondering if I will receive the Family Maximum Benefit or a lesser amount? Is my spouse eligible to receive benefits by caring for our minor children under my benefit? If I visit a Social Security office, will I get accurate information? —Michael

A. Let me take your questions one at a time.

First, I’m betting my definition of “most advantageous” might differ from yours. To me, it’s not just about putting the most dollars in my pocket but about insuring myself against living to a very old age (so I don’t run out of money) and making sure my wife will have the largest possible benefit when I’m gone.

Because your wife is nearly 17 years younger than you— and women typically live longer than men anyway— she is likely to outlive you by at least 20 years. Because she has no earnings record to speak of, you need to think about how she can receive the highest possible income in her old age.

The most effective way for you to do this is to delay claiming Social Security until you’re 70 in 2023. Of course, it may be that your family needs immediate Social Security income. But if you can wait until 70, your retirement benefit will be 76% higher than at age 62 and 32% higher than at age 66. This is due to early retirement reductions for claims prior to your Full Retirement Age (FRA)—66 for you—and delayed retirement credits between age 66 and 70. And these percentages are in “real,” inflation-adjusted terms.

When you die, your wife stands to receive your entire benefit for the rest of her life. That’s likely to be essential income, since, as you’ve said, she’s unlikely to qualify for Social Security on her own earnings record. So, if it was me, I’d break a leg trying to make sure she would be getting the maximum retirement benefit for all of those years.

Now, with apologies for possibly treading on uncomfortable ground, if you are still alive in 2032, she may want to begin taking reduced spousal benefits when she is 62, which is also as soon as she can. The benefits would be higher if she waited until she reached her FRA, which in her case is age 67 (unless Congress raises the FRA, which is possible). This would be in the year 2037, when you would be 84.

Your remaining life expectancy, according to actuarial projections, will be only a few years at this point. And it’s a safe bet that your wife will immediately switch to a widow’s benefit when you pass away. So she is almost certainly going to receive more total spousal benefits by claiming reduced benefits early than by waiting five years to claim a larger benefit.

The Family Maximum Benefit (FMB) is the total amount of benefits that you and your family members are entitled to receive based on your earnings record. But these benefits will most likely come into play when you’re no longer around. The FMB will include a widow’s benefit to your wife and, if your kids are still minors or disabled, and in her care, children’s benefits.

As for the accuracy of information provided by Social Security, I have never seen an independent study of this matter. Not surprisingly, the agency defends its record for providing accurate information. But, with something like three million requests for help every week, even a 1% error rate would mean that 30,000 people would be misinformed each week. To avoid being one of them, I’d seek information from multiple Social Security sources—online, over the phone and in person.

Best of luck.

Philip Moeller is an expert on retirement, aging, and health. His book, “Get What’s Yours: The Secrets to Maxing Out Your Social Security,” will be published in February by Simon & Schuster. Reach him at moeller.philip@gmail.com or @PhilMoeller on Twitter.

Read next: Here’s a Smart Strategy for Reducing Social Security Taxes

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MONEY retirement income

The Single Biggest Retirement Mistake

faucet pouring money into bottomless bucket
C.J. Burton—Corbis

Don't think of your retirement savings as one big bucket of money. Instead, divide up your assets.

The single biggest retirement mistake I see is that retirees don’t set aside funds for income during the early years of their retirement. They go directly from accumulating retirement funds to withdrawing them. And that can be a big problem.

Let me explain. The usual approach to retirement savings is to treat the client’s funds as if they are all in one pile. Under this method, the account is divvied up between stocks, bonds, and cash. A systematic monthly withdrawal begins to provide income, typically starting out at 4% of the client’s portfolio value for the first year. Each year afterward, the withdrawal amount is adjusted upward to match inflation.

This rate is considered by many advisers to be safe in terms of generating sustainable income over a two- or three-decade retirement. Unfortunately, it leaves many clients concerned about outliving their money. Let’s use 2008 as an example. At the time, I saw recent retirees who had $1,000,000 in their 401(k)s and who thought, based on the 4% formula, that they were set with $40,000 of annual income. Within the first year or two of their actual retirement, however, the market crashed and they were then drawing on a balance of $600,000. Most could not decrease their expenses, so they continued to withdraw $40,000 through the downturn, which was an actual withdrawal rate of almost 7%.Worse yet, the market crash caused retirees to lose confidence in their original plans. They pulled most, if not all, of their retirement funds out of the market, thus missing the ensuing recovery.

The compounding errors of higher-than-anticipated withdrawal rates and bad market-timing decisions doomed many to outliving their funds. This syndrome actually has a name: “sequence risk.” Academics are well aware of this risk, but few planners properly address the issue with clients and almost no individual investors are aware of the concept.

The problem can be alleviated by setting aside up to ten years’ worth of income at the inception of retirement. I address this problem with an approach called the Bucket Plan, which segments a retiree’s investible assets into three categories, or buckets.

Here is the breakdown:

  • The “Now” bucket is where the client’s operating cash, emergency funds and first-year retirement income reside. It will typically be a safe and liquid account such as a bank savings account, money market fund, or CD. These are the funds on which the client is willing to forgo a rate of return, in order to keep them safe and liquid. The amount allocated to the Now bucket will vary based on the clients assets and sources of income, but typically you would want to see no less than 12 months of living expenses here.
  • The “Soon” bucket has enough assets to cover up to ten years’ worth of income for the retiree. The Soon bucket is invested conservatively with little or no market risk. That way, we know we have ten years covered going into the plan regardless of what the stock market does.
  • The “Later” bucket funds income, and hopefully an increase in income, when the Soon bucket is exhausted. By then, the Later bucket has been invested uninterruptedly for at least 10 years. We reload another round of income into the Soon bucket, and the process starts all over again. The Later bucket is the appropriate place for capital market participation.

Financial planners have long used the analogies of an emergency fund and an accumulation/distribution fund. The real innovations here are the addition of the Soon bucket for near-term income and the method for communicating the concept to clients.

A client who was recently referred to me had the 4% systematic withdrawal that most financial advisers recommend. This did not seem to make him happy, though, since he could not see how his finances would last in the long run. He was not confident about what might happen if he needed more than the 4% income because of an emergency. He wondered whether there would be anything left over for his children to inherit. He was losing sleep and not enjoying his retirement at all.

I explained our Bucket Plan method. The Later bucket funding the Soon bucket made perfect sense to him. He also loved the idea of the Now bucket for emergencies and unexpected expenses. The real beauty of this approach is it gives retirees great peace of mind. They are much less likely to make bad market-timing decisions because a market correction will have no effect on their current income.

The bucket concept is simple to explain, and clients always understand the role their money is playing and why. Most importantly, they have the confidence to ride out market volatility because they know where their income is coming from. Sometimes simplicity can be quite sophisticated.

———-

Jeff Warnkin, CPA and CFP, of the JL Smith Group, specializes in holistic financial planning for pre-retired and retired residents of Ohio. He incorporates investments, insurance, taxes, and estate planning when building financial plans for clients’ retirement years. Warnkin has more than 25 years of experience in the financial services industry, and is life- and health-insurance licensed.

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MONEY retirement planning

3 Simple Steps to Crash-Proof Your Retirement Plan

piggy bank surrounded by styrofoam peanuts
Thomas J. Peterson—Getty Images

The recent stock market slide is timely reminder to protect your retirement portfolio from outsized risks. Here's how.

At this point it’s anyone’s guess whether the recent turmoil in the market is just another a speed bump on the road to further gains or the start of a serious setback. But either way, now is an ideal time to ask: Would your retirement plans survive a crash?

The three-step crash-test below can give you a sense of how your retirement plans might fare during a major market downturn, and help you take steps to avert disaster. I recommend you do this stress-test now, while you can still make meaningful adjustments, rather than waiting until a crisis actually hits—and wishing you’d taken action beforehand.

1. Confirm your asset allocation. The idea here is to divide your portfolio into two broad categories: stocks and bonds. (You can create a third category, cash equivalents, if you wish, or throw cash into the bond category. For the purposes of this kind of review, either way is fine.)

For most of your holdings this exercise should be fairly simple. Stocks as well as mutual funds and ETFs that invest in stocks (dividend stocks, preferred shares, REITs and the like) go into the stock category. All bonds, bond funds and bond ETFs go into the bond category. If you own funds or ETFs that include both stocks and bonds—target-date funds, balanced funds, equity-income funds, etc.—plug their name or ticker symbol into Morningstar’s Instant X-Ray tool and you’ll get a stocks-bonds breakdown. Once you’ve divvied up your holdings this way, you can easily calculate the percentage of your nest egg that’s invested in stocks and in bonds.

2. Estimate the downside. It’s impossible to know exactly how your investments will perform in a major meltdown. But you can at least estimate the potential hit based on how your portfolio would have fared in past severe setbacks.

In the financial crisis year of 2008, for example, the Standard & Poor’s 500 index lost 37% of its value, while the broad bond market gained just over 5%. So if you’ve got 70% of your retirement portfolio in stocks and 30% in bonds, you can figure that in a comparable downturn your nest egg would lose roughly 25% of its value (70% of -37% plus 30% of 5% equals 24.4%—we’ll call it 25%). If your portfolio consists of a 50-50 mix of stocks and bonds, its value would drop about 15%.

Remember, you’re not trying to predict precisely how the market will perform during the next crash. You just want to make a reasonable estimate of what kind of hit your retirement savings might take so you can get an idea of what size nest egg you may end up with when things get ugly.

3. Assess the impact on your retirement. Go to a retirement income calculator that uses Monte Carlo simulations and enter your nest egg’s current value as well as such information as your age, income, when you plan retire, how your savings are invested and how much you’re saving each year (or spending, if you’re already retired). You’ll come away with the percentage chance that you’ll be able to generate the income you’ll need throughout retirement based on things as they stand now. Consider this your “before crash” estimate. Then, get an “after crash” estimate by plugging in the same info, but substituting your nest egg’s projected value after a downturn from step 2 above.

You’ll now be able to gauge the potential impact of a market crash on your retirement prospects. For example, if you’re 45, earn $80,000 a year, contribute 10% of pay to a 401(k) 70% in stocks and 30% in bonds that has a current balance of $350,000, you have roughly a 70% chance of being able to retire on 75% of pre-retirement salary, according to T. Rowe Price’s Retirement Income Calculator. Were your portfolio’s value were to drop 25% to $262,500 in a crash, your probability of retirement success would fall to 55% or so.

Once you see how a major setback might affect your retirement prospects, you can consider ways to protect yourself. For someone like our fictional 45-year-old above, switching to a more conservative portfolio probably isn’t the answer since doing so would also lower long-term returns, perhaps reducing the odds of success even more. Rather, a better course would be to consider saving more. And, in fact, by boosting the savings rate from 10% to 15%, the level recommended by many pros as a reasonable target, the post-crash probability of success rises almost to where it was originally.

If you’re closer to or already in retirement, however, the proper response to a precipitous drop in the odds of retirement success could be to invest more cautiously, perhaps by devoting a portion of your nest egg to an annuity that can generate steady, assured income. Or you may want to maintain your current investing strategy and focus instead on ways you can cut spending, should it become necessary, so you can withdraw less from your portfolio until the markets recover.

Truth is, there’s a whole range of actions you might take—or at least consider—that could put you in a better position to weather a market crash (or, for that matter, provide a measure of protection against other setbacks, such as job loss or health problems). But unless you go through this sort of stress test, you can’t really know what effect a big market setback might have on your retirement plans, or what steps might be most effective.

So run a scenario or two (or three) now to see how you fare, assuming different magnitudes of losses and different responses. Or you can just wait until the you know what hits the fan, and then scramble as best you can.

Walter Updegrave is the editor of RealDealRetirement.com. If you have a question on retirement or investing that you would like Walter to answer online, send it to him at walter@realdealretirement.com.

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MONEY Social Security

Here’s a Smart Strategy for Reducing Social Security Taxes

Ask the Expert Retirement illustration
Robert A. Di Ieso, Jr.

Q. If I delay filing for Social Security until age 66, can I receive the benefit and continue to work? I’d like to draw Social Security benefits yet keep working until age 75. What are the tax implications of my strategy? —Steven

A. First off, you can always continue to work and draw Social Security benefits. Benefits are reduced temporarily if your outside income exceeds certain levels. But these reductions do not apply for benefits received at age 66 or later, which will be the case with you.

If you work and collect benefits, however, your increased income may push you into a higher tax bracket, which may mean your Social Security income may be taxed. If you haven’t already done so, go online to my Social Security and create an account. You will then be able to see your projected benefits at age 66.

To make an accurate estimate of your federal income taxes, keep in mind that not all of your Social Security income is taxable at the federal level. Social Security uses a measure it calls “combined income” to determine how much of your benefit is taxable, and it’s not intuitively obvious. So work through the numbers carefully—you may need to refer to your most recent tax return to make the calculation.

To determine your combined income, take your adjusted gross income (from your tax return), add any non-taxable interest income you’ve received in the past year, and then add half of your Social Security benefit.

If the total is less than $25,000 ($32,000 on joint tax returns), you will pay no income taxes on your Social Security benefits. If the total is between $25,000 and $34,000 ($32,000 to $44,000 on joint returns), you may have to pay taxes on half your Social Security benefits. People with higher combined incomes may have to pay taxes on 85% of their Social Security benefits, which is the maximum rate.

You also should consider if you can afford to live just on your salary and defer your own Social Security benefits until age 70. This will have two positive impacts:

First, delayed retirement credits will increase your monthly Social Security payments by 8% a year (plus annual inflation adjustments). If you defer for four years, your benefits will rise by 32% compared with their level at age 66.

Second, your tax rate likely will be reduced if you’re only receiving wage income from age 66 to 70. When you do stop working and rely more heavily on Social Security payments, your reduced income may translate into lower taxes on your Social Security benefits as well as a lower overall federal tax rate.

Lastly, if you are single and plan to stay so, you should consider filing and suspending your Social Security benefit at age 66. By doing so, you will have the option of going back to Social Security anytime before age 70 and requesting a lump-sum payment for all the benefits that were suspended. That could come in handy if you face an emergency cash crunch. But there’s a downside: if you request a lump-sum payment, Social Security will erase all your delayed retirement credits. Your lump sum will be valued as if you took benefits at 66, and this also will be the level of your regular monthly benefit going forward.

Even the best of plans could change if you run into financial or health problems, so preserving the right to get a lump-sum payment is a good idea for single persons. For someone who is or has been married, however, spousal benefits can be knocked for a loop if you file and suspend, so think twice about using this option.

Philip Moeller is an expert on retirement, aging, and health. His book, “Get What’s Yours: The Secrets to Maxing Out Your Social Security,” will be published in February by Simon & Schuster. Reach him at moeller.philip@gmail.com or @PhilMoeller on Twitter.

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MONEY Second Career

How to Build a Second-Act Business with Your Millennial Kid

Combining complementary skills of two generations can be a recipe for success

It’s awesome working with my dad,” says Case Bloom, 30. The feeling is mutual, says his father, David, 58: “We are good complements to one another.”

Among the more striking developments I’ve learned researching my new book, Unretirement, is the rise in boomer parents going into business with their adult children, like the Blooms—co-owners of Tucker & Bloom, a Nashville, Tenn. luggage business.

In the past few years, setting up a multigenerational enterprise has been a mutually savvy way for boomers and their kids to deal with tough economic times. The parents typically have capital and plenty of experience, while their adult children burst with energy and tech skills.

From ‘You’ to ‘We’

The Blooms, and their business manufacturing highly-crafted messenger bags targeted at the DJ market, are a prime example. Before opening shop, David had spent his career in bag design and was director of travel products for Coach in New York City before he lost that job. When Case was in college in Nashville, studying business, he’d offer pointers to help his dad’s venture. “His logo was so bad. Horrible,” laughs Case. “I’d tell him, ‘You’re doing it wrong. Do it like this.’”

Eventually, Case says, it became “We should do it this way. The business happened organically.” Today, father and son each own half of the company, which has seven employees. David handles design and product development; Case is in charge of anything to do with the brand image and online sales. He’s also the one making frequent runs to Home Depot for the business’s factory and to the Post Office for shipments. “I have a different set of skills than my father,” says Case, who is also a part-time DJ.

When Kinship Is Friendship

One reason for the growing second-act-plus-child trend: surveys repeatedly show that today’s young adults generally get along well with their parents—and vice versa. “The key is an attitudinal shift in the relations between generations,” says Steve King, founder of Emergent Research, a consulting firm focused on the small business economy. “Boomers are close to their kids and the kids are close to their parents.”

Take Amanda Bates, a Gen X’er, and her mother Kit Seay, co-owners of Tiny Pies in Austin, Texas. “We’ve always had a close relationship, feeding off one another, finishing each other’s sentences,” says Kit, 73. They’d long wanted to do something together.

Several years ago, Amanda got the idea for making handheld pies from her son’s desire to take pie to school. So she and her mother began selling small pies, based on family recipes, in local farmers markets. They now sell them throughout the state, mostly through specialty stores, and opened a retail storefront at their wholesale facility in March 2014. Kit focuses on the creative and catering side of the business; Amanda’s in charge of the basics of running an enterprise. “The trust is there,” says Kit. Amanda agrees. “Yes, the trust is there. If she says something will get done, it will.”

Teaching Your Child Trust

Trust and complementary skills are also themes for Lee Lipton, 59, and his son Max, 25, and their Benny’s On the Beach restaurant in Lake Worth, Fla.

Lee, the restaurant’s principal owner, came out of the clothing manufacturing business, moving to Florida after the Calvin Klein outerwear line he ran with a few partners was sold. He bought Benny’s a year ago. Max, who’d wanted to get into the food business, is one partner; the other is chef Jeremy Hanlon. Lee’s the deal maker, Max manages the restaurant and executive chef Hanlon handles the kitchen. “The three of us trust each other incredibly and when one person feels strongly about something we tend to do it that way,” Lee says. “Very rarely after talking do we disagree, and that format was identical to my past partners. I want to teach Max and Jeremy that closeness.”

For second-act family businesses, creating boundaries between work and home is advisable, but easier to say than do. Speaking about her current relationship with her mom, Amanda Bates says: “We used to go out together and have fun, go to garage sales, that kind of thing. Now, when we get together, the business always come up. Even at family dinners, we end up talking business.”

The Win-Win of Multigenerational Businesses

But in the end, it’s family that makes these businesses succeed.

Bianca Alicea, 26, and her mom Alana, 46, started tchotchke-maker Chubby Chico Charms. in North Providence, R.I. with $500 and less than 100 charm designs at their dining room table in 2005. They now have roughly 25 full-time employees and sell several thousand handmade charms. Alana is the designer; Bianca deals more with payroll and other aspects of the business. “It’s important to remember you are family,” says Bianca. “Things don’t always go according to plan, but at the end of the day you have to see one another as family.”

Intergenerational entrepreneurship, it turns out, can be a win-win for boomers and their kids. For the parents, it’s the answer to the question: What will I do in my Unretirement? For their adult children, working with mom and dad provides them with greater meaning than just picking up a paycheck.

Chris Farrell is senior economics contributor for American Public Media’s Marketplace and author of the new book Unretirement: How Baby Boomers Are Changing the Way We Think About Work, Community, and The Good Life. He writes twice a month about the personal finance and entrepreneurial start-up implications of Unretirement, and the lessons people learn as they search for meaning and income. Send your queries to him at cfarrell@mpr.org or @cfarrellecon on Twitter.

More from Next Avenue:

Businesses Mixing Older and Younger Partners

Hiring Your Parent

Older Entrepreneurs Are Better Than Younger Ones

MONEY Social Security

The Right Way to Claim Social Security Lump-Sum Benefits

Ask the Expert Retirement illustration
Robert A. Di Ieso, Jr.

Q. I have a question regarding collecting half of my Social Security benefit in a lump sum when filing a claim for the first time. Is this an option that you are aware of? If so, how does it work? I am not at retirement age yet, but would like to be prepared with all options when the time comes. — Mary

A. There are two types of lump-sum options available to you, but neither involves collecting half of your Social Security benefit. And both options are only available to those who have reached full retirement age, as defined by Social Security. That age is now 66 for people born between 1943 and 1954, and it will rise for people born later, eventually settling at 67 for anyone born in 1960 or after.

The first lump-run option applies to someone who delays filing for Social Security past full retirement age. In this scenario, you can decide to receive up to six months of your delayed benefits in a lump sum. Here’s how this works: If your full retirement age was 66 but you did not file for benefits until you were 66 years and six months of age, you could get your “missed” six months of benefits paid to you as a lump sum. If you filed later than this, however, you’d still only be able to get a maximum of six months of payments. And if you filed earlier—say, when you were 66 years and four months of age—you’d get a lump-sum payment that equaled only four months of missed benefits.

Keep in mind, collecting the lump sum may not be the best way to maximize your benefits. Because of delayed retirement credits, your monthly Social Security benefit rises by 8% a year (plus the rate of inflation) should you elect not to begin benefits at age 66. Deferred benefits will keep rising until you turn 70, when they will be 32% larger than if you began them at 66. So, while you could collect a six-month lump sum payment if you delayed filing until age 66-and-a-half, you also could simply file at that age for a monthly benefit that would be 4% larger for the rest of your life.

The second lump-sum option involves what’s called “filing and suspending” your benefits at age 66. This is usually done if you seek to preserve your full retirement benefit while making a spousal claim based on the earnings record of your husband or wife. But it’s also an appropriate strategy for single people who will only claim their individual retirement benefit.

When you file and suspend, you retain the right to collect a lump-sum payment for all the months during which your benefit is suspended. Say you plan to defer your Social Security until age 70, when your benefit reaches its highest value. If you file and suspend at age 66, you would be entitled to receive up to four years of suspended benefits in a lump-sum payment. Now, even if you never intended to collect Social Security until you turn 70, you might run into a health or financial emergency where the lump-sum payment makes a lot of sense. But if you had never filed and suspended, you would not be entitled to a lump-sum payment. The agency would just begin payments in whatever month you filed.

But this strategy has a downside: if you file and suspend and then later ask for a lump-sum payment of suspended benefits, you will lose your delayed retirement credits. That means your payments will be calculated based on the level of benefits you are entitled to at 66, not at the age when you ask for the lump-sum payment. And your future Social Security benefits will also be calculated as if you had claimed at 66, not later.

I know this is complicated. Please let me know if you have any other questions about lump-sum payments for Social Security.

Best of luck.

Philip Moeller is an expert on retirement, aging, and health. His book, “Get What’s Yours: The Secrets to Maxing Out Your Social Security,” will be published in February by Simon & Schuster. Reach him at moeller.philip@gmail.com or @PhilMoeller on Twitter.

Read next: How Social Security Calculates Your Benefits

MONEY retirement planning

Forget Feel-Good Resolutions! Just Do These 3 Retirement Tasks in 2015

141223_RET_3RESOLUTIONS
Getty Images

Resolutions are just a ritual. If you really want to reach your retirement goals, these three steps will help you get there.

Fidelity Investments reports that the number of people making New Year’s financial resolutions is down 28% from last year. Excuse me if I don’t see this as cause for alarm. In fact, I think we should ditch the whole resolution thing and just focus on achieving a few key retirement-planning goals.

I wouldn’t go so far as to say New Year’s resolutions are a waste of time. Indeed, Fidelity’s sixth annual New Year Financial Resolutions Study suggests that people who make them might be better off than those who don’t.

But let’s be honest. The resolution ritual is often more about letting us feel that we’re improving our finances rather than a realistic way to set concrete goals and track our progress toward meeting them.

If you feel the need to make some resolutions, fine. But if you really want to make headway toward a secure retirement, I suggest you also identify a few specific tasks that are challenging but doable and that can definitely improve your retirement prospects.

Here are my three candidates.

Task #1: Save at least 15% next year. Saving more is the most common financial resolution. Some people even put a number on their resolve: an extra $200 a month on average in Fidelity’s survey. But as admirable as the intention to save more may be, you’ll be much better off if you set a savings target that’s actually based on achieving some larger goal, like a comfortable retirement.

That’s where the 15% figure comes in. While it’s impossible to know exactly how much you should save to have a decent shot at maintaining an acceptable standard of living throughout retirement, a recent study from the Boston College Center for Retirement cites 15% as the percentage of salary the typical American household should be putting away each year.

There are plenty of good ways to save, but you’ll increase your chances of socking away this amount each year if you put your savings effort on autopilot. The easiest way to do that: sign up for your 401(k) plan. If your plan, like most, offers employer matching funds, you’ll find it easier to reach 15%. If you don’t have access to a 401(k), open an automatic investing plan with a mutual fund company and have 1.25% of salary (15% divided by 12) transferred each month from your checking account to your fund account.

Task #2: Do a rigorous portfolio review. Lots of people give their retirement portfolio the once-over this time of year. Some may even go to the trouble of rebalancing it. But I’m talking about taking a much more in-depth look at your retirement investment holdings.

Start by completing a risk tolerance questionnaire. That will give you a good sense of how your portfolio should be allocated between stocks and bonds. By then plugging your investments into a tool like Morningstar’s Portfolio Review, you can see whether your holdings jibe with your appetite for risk. Over the course of a long bull market like we’ve had the past five years, many investors end up with a higher stock stake than they should have—something they often don’t realize until the market crashes.

Next, go for an even deeper dive to see how your portfolio is allocated among different types of stocks and bonds. Are you dangerously over weighted in risky small-cap stocks? Have you loaded up too heavily on low-quality bonds in search of fatter yields? Your portfolio’s stock and bond allocations don’t have to match the make-up of the overall stock and bonds exactly. But if they get too far off, you may be taking on outsize risk.

And don’t forget fees. It’s pretty easy to assemble a portfolio of stock and bond funds or ETFs with annual expenses less than 0.5%. You may even be able to have your portfolio professionally managed for roughly that amount, if not less. High costs drag down performance, so go over your holdings to see if there’s a way you can scale back what you’re paying in fees.

Task #3: Give Yourself a Retirement Check Up. Unless you actually crunch the numbers, it’s impossible to know whether you’re on track for a comfortable retirement. Fortunately, running the numbers isn’t very time consuming or difficult these days. Just go to a retirement income calculator that uses Monte Carlo simulations, plug in such info as the amount you have saved, how much you’re putting away annually (or spending, if you’re already retired), how your money is invested and how long you need your savings to last, and you’ll come away with an estimate of the probability that your savings will be able to sustain you throughout retirement.

If that probability is uncomfortably low—say, 70% or less—then repeat the exercise to see what adjustments will improve the odds. Typically, going to a higher savings rate or postponing retirement a few years (or both) will trigger the biggest improvement. If you don’t like doing this sort of analysis on your own, you can always hire an adviser to do it for you.

Feel free to make a longer list of goals and resolutions for the New Year. But if you complete just these three tasks, you’ll know you’ve taken meaningful steps that to boost your shot at a secure retirement in the coming year and beyond.

Walter Updegrave is the editor of RealDealRetirement.com. If you have a question on retirement or investing that you would like Walter to answer online, send it to him at walter@realdealretirement.com.

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MONEY Social Security

How Social Security Calculates Your Benefits

Ask the Expert Retirement illustration
Robert A. Di Ieso, Jr.

Q. Is it possible to obtain the inflation index that Social Security uses to adjust each year’s earning such that I could attempt to perform the overall calculation myself? I’m interested in knowing whether any of my earnings prior to 35 years ago are being counted in the index rather than the most recent 35 years’ worth. — Bob

A. Bob, you must have a masochistic streak! You can do what you suggest but it may wear out your calculator.

Social Security has a different index for every year! It is based not on prices but on wages. Basically, the agency adds up all the wages earned in the nation each year (there’s a two-year lag to get this data), divides them by the number of workers, and looks at how much wages per person have risen from year to year. The actual mathematical process is, of course, much more complicated.

These annual wage changes produce a set of indexing factors. The way these factors affect your own benefits is keyed to the year in which you first become eligible for benefits. For retirement benefits, this is 62. Entering this calendar year in an online tool will give you the annual indexing factors you can apply to your own earnings. Take your annual covered earnings (the earnings on which you pay Social Security payroll taxes), multiply it by that year’s index factor and you will obtain your indexed wage for each year you have worked.

Next, add up all these indexed wages and divide them by 35 to determine your average wage. If you’ve not worked 35 years, use zeroes for any missing year until you have 35 numbers. Finally, you need to find out what’s called your Average Indexed Monthly Earnings. So, multiply your 35 years of highest indexed earnings by 12 and then divide this total by 420 (the number of months in 35 years).

Your Average Indexed Monthly Earnings is the figure on which your retirement benefits are based. And it will change to reflect a new “top 35″ earnings year. If interested, the way the AIME determines your benefits is explained here.

If you have not given up by now, you also need to know that Social Security only indexes your wages until you are 60. For later years, it simply uses the actual amount of your covered earnings. For this reason, people who keep working in their later years will often see their benefits automatically recomputed upward to reflect a new top-35 year.

Clear as mud, right?

Anyway, that’s how it works. Or at least I think it is. Honestly, it is so confusing that even experts, including me, make mistakes.

Best of luck!

Philip Moeller is an expert on retirement, aging, and health. His book, “Get What’s Yours: The Secrets to Maxing Out Your Social Security,” will be published in February by Simon & Schuster. Reach him at moeller.philip@gmail.com or @PhilMoeller on Twitter.

Read next: How Your Earnings Record Affects Your Social Security

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