Every year, there are innovators who come up with fresh solutions to nagging problems. Companies roll out new products or services, or improve on old ones. Researchers propose better theories to explain the world. Or stuff that’s been flying under the radar finally captivates a wide audience. For Money’s annual Best New Ideas list, our writers searched the world of money for the most compelling products, strategies, and insights of 2014. To make the list, these ideas—which cover the world of investing, technology, health care, real estate, college, and more—have to be more than novel. They have to help you save money, make money, or improve the way you spend it, like these six retirement innovations.
Best Kick-Start for Newbies: The MyRA
Half of all workers—and three-quarters of part-timers—don’t have access to an employer-sponsored retirement plan like a 401(k). The new MyRA, highlighted in President Obama’s State of the Union address in January, will fill in the gap, helping millions start socking away money for retirement. Even if you are already well on your way to establishing your retirement nest egg, you could learn something from this beginner’s savings account.
The idea: The MyRA, rolling out in late 2014, is targeted at workers without employer plans. Like a Roth IRA, the contributions aren’t tax-deductible, but the money grows tax-free. Savers fund a MyRA via payroll deductions, with no minimum investment and no fees.
What’s to like about this baby ira: The MyRA’s investments, modeled after the federal government’s 401(k)-like Thrift Savings Plan, emphasize safety, simplicity, and low costs. Those are principles more corporate plans—and individual savers—should embrace.
Best Workplace Plan That’s Finally Come of Age: The Roth 401(k)
With a 401(k), you sock away pretax money for retirement and then pay taxes when you withdraw the funds. With a Roth 401(k), you do the opposite: take a tax hit upfront but never owe the IRS a penny again. Few workers take advantage of this option. Now that could be changing.
This year Aon Hewitt reported that for the first time, 50% of large firms offer a Roth 401(k), up from 11% that did so in 2007. Adoption levels—still only 11%—tend to pick up once plans have a Roth on the menu for several years and new hires start signing up, Aon Hewitt reports.
A recent T. Rowe Price study found that even though young workers who expect to pay higher taxes in the future reap the greatest benefit, savers of almost every age collect more income in retirement with a Roth 401(k). A 45-year-old whose taxes remain the same at age 65 would see a 13% income boost, for example. And, notes Stuart Ritter, senior financial planner at T. Rowe Price, “the money in a Roth is all yours.”
Best New Defense Against Running Out of Money
When the only retirement plan you have at work is a 401(k), you may yearn for the security you would have gotten from monthly pension checks. Pensions aren’t coming back, but the government is letting 401(k) plans be more pension-like. A rule tweak by the Department of Labor and the IRS should make it easier for employers to incorporate deferred annuities into a 401(k)’s target-date fund, the default retirement option for many. Instead of a portfolio of just stocks and bonds that grows more conservative, target-date savers would have a portion of their funds socked into a deferred annuity, which they could cash out or convert to a monthly check in retirement. Done right, the system could re-create a long-missed pension perk, says Steve Shepherd, a partner at the consulting firm Hewitt EnnisKnupp. “They are making it easier and more cost-effective to lock in lifetime income.”
Best Supreme Court Ruling
In June the Supreme Court issued a ruling that makes it easier for Fifth Third employees to sue the bank over losses they suffered from holding company stock in their 401(k)s. The share price fell nearly 70% during the financial crisis. By discouraging companies from offering stock in plans in the first place, the unanimous decision could help 401(k) savers everywhere.
For years—and especially since the 2001 Enron meltdown—experts have advised against holding much, if any, company stock in your retirement plan. Still, not everyone has gotten the memo. About 6% of employees have more than 90% of their 401(k)s in company stock, the Employee Benefit Research Institute reports. About one in 10 employers still require 401(k) matching contributions to be in company shares, according to Aon Hewitt, a benefits consulting company.
With heightened legal liability, that could finally change. The upshot, according benefits lawyer Marcia Wagner, is that fewer employers will offer their own stock in their 401(k)s. “It’s risky for them now,” she says. That’s “a tectonic shift.”
Best New Book on Retirement
You may think you’ve heard a lot the looming retirement crisis. Well, it’s worse than you think. That’s the message of a new book, Falling Short, written by retirement experts Charles Ellis, Alicia Munnell, and Andrew Eschtruth.
One of their main targets is the 401(k), whose success depends on an unlikely combo of investor savvy, disciplined saving and great market returns. As things stand now half of Americans may not be able to maintain their standard of living in retirement. Their prescription? Don’t wait for Washington to fix things. Save as much as you can, work longer, and delay Social Security to increase your benefits.
Best New Idea About Where to Retire
Whether you can stay in your home after you retire is as much about where you live as it is about your house. Yes, there are inexpensive changes you can make to age-proof your home, but is your town a good place to age? AARP is helping people answer that question. Through its Network of Age-Friendly Communities, AARP is working with dozens of cities and towns to help them adopt features that will make their communities great places for older adults. Those include public transportation, senior services, walkable streets, housing, community activities, job opportunities for older workers, and health services.
Nearly half of the 41 places that have joined the network signed on in 2014, including biggies such as San Francisco, Boston, Atlanta, and Denver. Membership requires a commitment by the community’s mayor or chief executive, and communities are evaluated in a rigorous program that is affiliated with the World Health Organization's Age Friendly Cities and Communities program and is guided by state AARP offices. This spring, AARP will launch an online index rating livability data about every community in the U.S.