MONEY Workplace

Here’s How to Deal With Noisy Neighbors at Work

How should you deal with a loud co-worker? MONEY's Donna Rosato gives some tips on how to stay productive with noisy colleagues.

MONEY Workplace

The Trouble With Being Friends With People Who Work For You

Robert A. Di Ieso, Jr.

Q: Should a boss be friends with his or her employees?

A: Treating employees like pals didn’t always work out for Steve Carrell’s Michael Scott character on The Office, but you can be friends with people who work for you—if you set boundaries.

“When you’re working side-by-side, day after day with people, it’s perfectly natural for friendships to develop,” says Brian Fielkow, a CEO of a Houston logistics company and author of Driving to Perfection: Achieving Business Excellence By Creating A Vibrant Culture. “Some people believe work and your personal life should be separate. But most people don’t want to just punch a clock every day.”

Indeed, there’s lots of research that shows that having work friends is good for business. People with office buddies tend to be happier, more productive, and less likely to quit. Even workers who aren’t thrilled with the job itself are happier when they have friends at work because it gives them someone to vent to and reduces stress, according to Michael Sollitto, assistant professor of communication at Texas A&M University-Corpus Christi and author of a recent study on workplace relationships.

But the rules are different when the relationship is between people on different rungs of the corporate ladder. “Friendships with subordinates can be dangerous for your career and for the workers who are your friends,” says Fielkow.

If you’re going out to lunch, grabbing drinks after work, or playing golf with people who report to you, perceptions of an uneven playing field can fester. “Employees who aren’t part of that clique may start to feel like your chummy pals have better access to you than the rest of the team and are more likely to receive special treatment,” says Fielkow. People may not respect you if you play favorites.

Your friendship with a subordinate can also color co-workers’ feelings toward that person. If your friend gets a promotion or a big raise, it might be chalked up to your relationship, not his or her merits.

Plus, workplace friendships can make it harder for you to do your job. “It may be difficult to be critical of a friend you manage,” says Fielkow. “What if you have to lay to lay them off?” And if the friendship goes sour, that worker could undermine you by sharing intimate details about your life.

None if this means you can’t develop close relationships at work. If a friendship with a colleague grows, agree on boundaries. Don’t talk about other workers or business issues when you’re outside the office. Don’t share company information before it becomes public knowledge.

And make sure that you’re equally accessible to all members of your team. Communicate regularly with people who report to you. Walk around the office. A simple “how was your weekend” at the water cooler can go a long way toward making you approachable. “Showing a personal interest in your employees’ lives can help you be a better manager and create an atmosphere where people get more out of work than work,” says Fielkow.

MONEY long term care insurance

The Best Moves to Make So a Nursing Home Doesn’t Bankrupt You

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

Q: I am 62 and my wife is 58. We are considering buying long-term care insurance. However, we are also wondering if we have enough assets to self-insure. We have more than $2 million and no debt. We plan to retire to North Carolina, where long-term care costs are considerably less than in New Jersey. Would you be able to help us make this decision? – Bob Hyde, Flemington, N.J.

A: The decision is understandably difficult. A nursing home, assisted living facility, or home health care can cost tens of thousands of dollars a year, and no matter where you live, a lengthy illness could quickly deplete your savings. But long-term care insurance policies are expensive and restrictive, and insurers are hiking premiums as people live longer and require more care than insurers anticipated.

The high cost is one reason fewer than 8% of Americans have long-term care insurance. Many people mistakenly believe that Medicare will cover long-term care needs. The reality is that most people use their own resources to pay, and when those assets are exhausted, they turn to Medicaid.

There’s no easy answer to the best way to plan for long-term care needs, even as people grow increasingly worried about having enough money to cover the cost of a protracted illness.

A recent study has some good news and some bad news on this front. While previous research seemed to overstate the duration of care for people who need it, the risk of requiring care at all may be higher than previously thought.

According to the study, by senior economist Anthony Webb of the Center for Retirement Research, U.S. nursing home stays are relatively short: 11 months for the typical single man and 17 months for a single woman. But the risk that an older person may one day need some kind of nursing home care is considerable: 44% for men and 58% for women.

In your case, you have substantial savings for retirement and no debt, so that should make it possible to self-insure without jeopardizing your retirement lifestyle, says Tom Hebrank, a long-term care insurance specialist and financial planner in Atlanta.

But it doesn’t have to be an all-or-nothing decision, Hebrank says. You could, for example, buy more limited coverage and plan to pay the rest from savings. That would bring the cost of insurance way down.

A couple your age would pay about $7,700 a year for a policy that would cover three years’ worth of nursing care and provide a 5% compound annual increase in benefits to keep up with inflation. If you reduce the amount of inflation protection to 4%, your annual premium drops to $6,000; at 3% it falls to $3,500.

Another way to reduce the cost of a policy is to cut the daily benefit from, say, $150 to $100. Or you could limit the number of years benefits are paid. A policy that covers three years will be about one-third cheaper than one that provides unlimited benefits, according to the American Association of Long Term Care Insurance. How much you can afford depends on your retirement income. The National Association of Insurance Commissioners (NAIC) suggests that you spend no more than 7% of your income on premiums.

You can get free quotes from the American Association of Long Term Care Insurance to price out different options.

When deciding whether or not to buy long-term care insurance, you should also consider how liquid your assets are and whether you want to preserve money for your spouse or heirs. If the bulk of your wealth is tied up in your home, it won’t be easy to tap if you need quick access to the money for medical bills. Long-term care insurance is another way to preserve your assets and protect a surviving spouse who may also need care down the road, Hebrank says.

For some people, having long-term care insurance buys peace of mind, so it seems worth the price. “They don’t want to be a burden to their spouse or kids,” he says, “so even if it’s expensive, they feel better knowing they have coverage.”

Get more answers to your questions about long-term care insurance:
What should I look for in a long-term care policy?
How much will a long-term care policy cost?
What’s the best age to buy long-term care insurance?

Read next: 5 Ways to Tell If You’re Really Ready to Retire

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MONEY retirement planning

5 Secrets to a Happy Retirement

Hammock underneath palm trees
Keep a smile on your face once your working years are over. Jason Hindley—Prop Styling by Keiko Tanaka

Sure, a fat nest egg and good health help. But there are less obvious ways to make sure your post-work life is a happy one.

Retirement ought to be a happy time. You can set your own schedule, take long vacations, and start spending all the money you’ve been saving.

And for many retirees that holds true. According to the Gallup-Healthways Well-Being Index, people tend to start life happy, only to see their sense of well-being decline in adulthood. No surprise there: Working long hours, raising a family, and saving for the future are high-stress pursuits.

Once you reach age 65, though, happiness picks up again, not peaking until age 85. In a recent survey of MONEY readers, 48% retirees reported being happier in retirement than expected; only 7% were disappointed.

How can you make sure you follow this blissful pattern? Financial security helps. And good health is crucial: In a recent survey 81% of retirees cited it as the most important ingredient for a happy retirement. Some of the other triggers are less obvious. Here’s what you can do to make your retirement a happy one.

1. Create a predictable paycheck. No doubt about it: More money makes you happier. Once you amass a comfortable nest egg, though, the effect weakens, says financial planner Wes Moss. For his recent book, You Can Retire Sooner Than You Think: The 5 Money Secrets of the Happiest Retirees, Moss surveyed 1,400 retirees in 46 states. The happiest ones had the highest net worths, but Moss found that money’s power to boost your mood diminished after $550,000.

“Once you reach a certain level, more money doesn’t buy a lot more happiness,” says Moss. Similar research based on the University of Michigan Health and Retirement Study found a dropoff in happiness with extreme wealth; after you’ve amassed some $3.5 million in riches, more money doesn’t increase your happiness as much.

Where your income comes from is just as important as how much savings you have, says Moss. Retirees with a predictable income—a pension, say, or rental properties—get more enjoyment from spending those dollars than they do using money from a 401(k) or an IRA.

Similarly, a Towers Watson happiness survey found that retirees who rely mostly on investments had the highest financial anxiety. Almost a third of retirees who get less than 25% of their income from a pension or annuity were worried about their financial future; of those who receive 50% or more of their income from such a predictable source, just under a quarter expressed the same anxiety.

You can engineer a steady income by buying an immediate fixed annuity. According to ImmediateAnnuities.com, a 65-year-old man who puts $100,000 into an immediate annuity today would collect about $500 a month throughout retirement.

2. Stick with what you know. People who work past 65 are happier than their fully retired peers—with a big asterisk. If you have no choice but to work, the results are the opposite. On a scale of 1 to 10, seniors who voluntarily pick up part-time work rate their happiness a 6.5 on average; that drops to 4.4 for those who are forced to take a part-time job.

The benefit of working isn’t just financial. It’s also a boon to your health—a key driver of retirement happiness. The physical activity and social connections a job provides are a good antidote to an unhealthy sedentary and lonely lifestyle, says medical doctor turned financial planner (and Money.com contributor) Carolyn McClanahan.

A 2009 study published in the Journal of Occupational Health Psychology found that retirees with part-time or temporary jobs have fewer major diseases, including high blood pressure and heart disease, than those who stop working altogether, even after factoring in their pre-retirement health.

Switching careers in retirement, though, isn’t as beneficial. Retirees who take jobs in their field reported the best mental health, says lead researcher Yujie Zhan of Canada’s Laurier University, perhaps because adapting to a new work environment and duties is stressful.

3. Find four hobbies. Busy retirees tend to be happier. But just how active do you have to be? Moss has put a number on it. He found that the happiest retirees engage in three to four activities regularly; the least happy, only one or two. “The happy retiree group had extraordinarily busy schedules,” he says. “I call it hobbies on steroids.”

For the biggest boost to your happiness, pick a hobby that’s social. The top pursuits of the happiest retirees include volunteering, travel, and golf; for the unhappiest, they’re reading, hunting, fishing, and writing. “The happiest people don’t do things in isolation,” says Moss.

That’s no surprise when you consider that people 65 and older get far more enjoyment out of socializing than younger people do.

4. Rent late in life. In retirement, as in your working years, owning a home brings you more joy than renting does. But as time goes on, that changes. Michael Finke, a professor of retirement and personal financial planning at Texas Tech University, analyzed the satisfaction of homeowners vs. that of renters from age 20 to 90-plus and found a drop late in life, particularly after homeowners hit their eighties.

The hassles of homeownership build as you age, Finke notes, and a house can be isolating. Most people want to stay put in retirement. Yet, says Finke, “you need to plan for a transition to living in an environment with more social interaction and less home responsibility.”

5. Keep your kids at arm’s length. Once you suddenly have a lot more time on your hands, your closest relationships can have a big impact on your mood. According to an analysis by Finke and Texas Tech researcher Nhat Hoang Ho, married retirees, particularly those who retire around the same time, report higher satisfaction than nonmarrieds—but only if the couple get along well. A poor relationship more than erases the positive effects of being married.

Children don’t make much of a difference, with one twist. Living within 10 miles of their kids leaves retirees less happy. “People overestimate the amount of satisfaction they get from their kids,” says Finke. The reason is unclear—could being a too accessible babysitter be the problem?

MONEY salary negotiation

The Foolproof Way to Make Sure You Land a Big Raise This Year

fishing net with money in it
Diane Macdonald—Getty Images

Resolved to increase your pay in 2015? These steps can help you scoop up a better-than-average bump.

A few years ago, you might have been grateful just to have a paycheck—even if it wasn’t as fat as you deserved. Today, you finally have the upper hand again when it comes to asking for a raise.

You can thank the rapid improvement in the job market in the last year for that. Unemployment is expected to drop to 5.4% by the end of this year, and 57% of companies say they are worried about retaining workers, up from 20% in 2010, according to PayScale.com’s Compensation Best Practices Report.

That’s putting pressure on employers to boost compensation: 82% plan to increase salaries for current employees this year, up from 73% last year, according to CareerBuilder’s latest jobs forecast.

“Workers should be feeling pretty good about their chances for getting a raise this year,” says CareerBuilder’s Mary Lorenz. Music to your ears, right?

The average worker should see a salary bump of 3%, according to estimations from Mercer’s 2014/2015 U.S. Compensation Planning Executive Survey. But those who are top performers or have in-demand expertise could see their paychecks rise even more. The average boost for the most valued employees will top 5%, according to Mercer.

To go from a so-so raise to a big bump up, here’s what you need to do:

Get on Your Boss’s Calendar

Don’t wait until performance-review time, typically in the spring, to ask for a raise. Not only will you have more competition from coworkers then, but budgets will already have been decided—which will make it harder for your supervisor to get you more cash even if he or she believes in your cause.

Assuming you and your company have had a good year—the latter also being a must—schedule a meeting with your supervisor ASAP before your window for the year closes.

Sure, even the most confident of workers may find it intimidating to call a meeting with the boss and ask for more money. But the odds are good that your boldness will pay off: A recent PayScale survey found that 44% of people who asked for a raise received what they asked for, and 31% more still got a raise, just less than they requested.

Collect Some Evidence

In the meantime, to help make your case, gather accolades from the past year.

Pull together emails of praise from higher ups, ask happy customers or clients to write testimonials for your work, and make a list of your major accomplishments, quantifying them as much as possible. Bottom-line-focused supervisors will especially want to hear about how you’ve boosted revenue or cut costs.

Put a Number On Yourself

“It’s important to go in with a number in mind,” says CareerBuilder’s Lorenz. “You should know your value and be able to go in with an idea of what you think you deserve and be ready to explain why.”

Your ask should be based around what others are getting, since you’ll shut down the conversation fast if you request a boost that’s out of the ballpark.

Start by seeing where your salary falls compared to others in similar jobs with the same skill set and years of experience, using sites such as PayScale.com and Glassdoor.com. Keep in mind that top performers may earn 10% to 15% more than these averages.

Put your findings in perspective by determining what’s realistic at your company. If you have a manager you’re close with, a higher up mentor, or a friend in HR, ask for insight on salary ranges for people at your level or on how much the company is budgeting for raises this year on average. If you’re a top performer and can prove it, you should feel comfortable asking for more than the average.

Make Your Ask

You’ve got your proof and your number, so you’re ready, right? Not quite. Ideally, you’ll want to do a run through of the conversation with someone, since practice will make you more comfortable when you’re in the moment.

You might start the conversation something like this: “Hey Jane, my department had a really great year in 2014, and I was hoping to get your feedback, talk about ideas going forward, and discuss my compensation.”

Then, dig into your successes. Since your boss may not realize all that you’ve accomplished, you should make him or her aware by pointing out a few key highlights from the “to-done” list you made. You could say, “I don’t know if you’re in the loop on everything I’ve accomplished this year, so I just wanted to point out of few of my biggest successes…” Bring up the testimonials where relevant.

Talk not only about your achievements but also about what you are going to tackle next. Your boss is more likely to reward you if you’ve got a plan for what you will do for the company, not just what you did.

Have a Plan B

The best outcome is a permanent boost in your salary. But if that’s not possible, ask for a bonus. One-time rewards, including spot bonuses and project completion bonuses, are on the rise as more companies worry about retaining employees, the WorldatWork Survey of Bonus Programs and Practices 2014 found.

Spot bonuses typically range from $2,500 to $5,000.

Be aware that income taxes can lop off up to 40% of the bonus, so ask if your company will “gross up” the reward so you actually get the whole amount.

Be Ready to Jump

You’re not always going to get what you want. If budgets are tight or layoffs are looming, your manager’s hands may be tied.

So you may have to leave to get that raise. But the good news for you is that even in good times, the biggest pay jumps come when you switch to a new job.

Job switchers simply have more leverage when negotiating salary, especially since the number of employees voluntarily quitting is at its highest since April 2008, according to the Bureau of Labor Statistics’ quits rate measure.

That leaves employers with a lot of empty positions to fill, and they are showing their eagerness to put bodies in these slots: The average wage growth for job changers rose from 4.3% at the start of 2013 to 4.5% at the end of 2014, according to a report by the Kansas City Federal Reserve.

So whether you stay or go, the chances are good that you’ll make more money in 2015.

More on financial resolutions:

MONEY Job market

4 Strategies to Land Your Dream Job This Year

Garden gnome with "need work" sign
Andrew Bret Wallis—Getty Images

The employment market is the strongest it's been in six years. Here's how to boost the odds you'll find the job you want in 2015.

New year, new job. That’s the mantra for many workers as 2015 kicks off. According to a survey by career management experts Right Management, 86% of workers in North America say they plan to actively look for a new job this year. That’s up from 83% last year and just 60% at the peak of the recession in 2009.

Buoyed by a rapidly improving job market and strong economy, people are feeling more confident about seeking out new opportunities. There’s no time like the present: The first Monday after the New Year is the busiest day for job search, and January is the busiest month of the year, according to job search engine SimplyHired. It was a gangbuster day: On Monday, job searches were up 56% from the December average.

“We call it ‘Job Hunt Monday.’ It’s like a Cyber Monday for jobs,” says Kristy Stromberg, senior vice president of marketing for SimplyHired. “The holidays are over and people are thinking about how they can improve their lives. We all spend so much time at work, finding a new job is a great way to make a positive change.”

Job-seekers are justifiably optimistic. More than one third of employers expect to add full-time, permanent employees in 2015, according to CareerBuilder’s annual job forecast. That’s the best outlook from the survey since 2006, up from one-quarter of employers last year.

The hottest industries for hiring are information technology, financial services, manufacturing, and healthcare, according to CareerBuilder. The biggest demand is in jobs tied to revenue growth, digital innovation, and customer loyalty—think sales, data analysis, and customer service.

The War for Talent

You’ll be especially attractive if you have expertise in hard-to-fill positions. More than three-quarters of human resource executives polled by Challenger Gray & Christmas report they are struggling to fill open positions, and 91% say that if the economy keeps expanding at its current rate, the war for talent will worsen.

Experience is most in demand in emerging fields such as cloud computing, mobile and search technology, cyber security, managing and interpreting big data, alternative energy, anti-terrorism and robotics.

Even if those areas aren’t in your wheelhouse, you’ll have an edge if you are considered a top performer at your current company. That’s if you’ve been receiving higher than average raises, bonuses, or promotions in the past few years. Losing talent is a big worry for employers: Nearly 60% of 4,700 companies surveyed in a PayScale.com compensation report said keeping higher performing workers from jumping ship is a top business concern, up from 20% in 2010.

Recruiters also like to target passive job seekers, those folks already employed who are just too busy to look for work.

“The balance has really shifted toward the job seeker,” says Stromberg. “Even if you’re working in an industry that’s contracting, now is a good time to make a move. Competition for talent is hotter. Employers are going to have to take more risk in hiring someone outside their traditional industry.”

Accurate, real-time salaries for thousands of careers.

If you’re itching for a new opportunity, use these strategies to make it happen.

Get the inside scoop. Many job openings, especially those at higher levels, are only announced internally, so you need to get insider info. Reach out to people you know at companies where you want to work. If you don’t know anyone directly, tap your personal network or use your LinkedIn contacts to make a connection to someone in the know about internal job openings. SimplyHired has a tool on its website that allows you to match job openings with your LinkedIn profile so you can see who in your network is at that company.

Be top of mind. Attract employers’ attention by raising your profile. Speak at industry conferences. Be active in professional organizations and on social media. Look at what your online presence signals about you. Use language in your LinkedIn profile that matches the type of positions you’d like to land so recruiters find you when they search for candidates. Create a website that showcases your work so it turns up in online searches for you.

Try temp work. If you’ve been out of work for a while, part-time, temporary, or contract positions are a good way to keep your skills up to date and can be a steppingstone to full-time work. Temporary employment is expected to pick up over the next 12 months as a way for employers to fill in-demand roles or keep costs lower with a flexible workforce even as business picks up. According to CareerBuilder, 46% of employers plan to hire temporary or contract workers in 2015, up from 42% last year. Of these employers, 56% plan to transition some temporary or contract workers into full-time, permanent roles.

Be open to opportunities. If a recruiter calls you or a friend passes on information about a job opening, find out more even if you’re not interested in the position or looking for work. A recruiter may know about another opportunity that’s a better fit. It is also a chance to share the information with others in your field that may be looking to make a change.

If you pay it forward, one of those people may pay it back when you are ready to make a move.

MONEY

4 Surefire Ways to Make Your New Year’s Resolutions Stick

$20, $1, $5 arranged to read 2-0-1-5
Sarina Finkelstein

Aiming to make positive changes in 2015? It's easier than you think to reach your goals.

If you’re like most people, this is the time of year when you pledge to shed bad habits and improve your life. About half of Americans make New Year’s resolutions each January, according to research by the University of Scranton.

It’s no surprise that people set intentions. What is surprising is how much the failure rate of resolutions is hyped. In fact, a good number of people do make goals with staying power: 59% of people who made resolutions for 2014 say they kept them, a Marist poll found. The University of Scranton’s researchers found that 46% of resolvers maintained their pledge past the six-month mark.

Money-related goals are one of the most popular, making up one-third of resolutions that people set for the coming year. More good news here: When it comes money, financial resolutions seem to be easier to achieve than other popular self-improvement vows.

According to a recent survey by Fidelity Investments, 42% of people find it easier to pay down debt and save more for retirement than to, say, lose weight or give up smoking. Among those who made a financial resolution last year, 29% reached their goal, and 73% got at least halfway there, Fidelity found. Only 12% of resolutions having to do with things like fitness and health do not end in failure, other research shows.

Unfortunately, the booming stock market and improved jobs picture may be making people a little too confident about their finances. Just 31% of people are considering a financial resolution this year, down from 43% last year. But the top goals remain the same: Save more (55%), pay off debt (20%), and spend less (17%), according to Fidelity.

No matter what kind of changes you are pledging to make in 2015, here are four ways to improve your odds of success.

1. Resolve to resolve. People who explicitly make resolutions are 10 times more likely to attain their goals than people who don’t articulate a goal, according to another University of Scranton study by professor John Norcross. After six months, 46% of people who wanted to change their behavior and made a resolution to do so were successful, vs. just 4% of people who desired to make a change but didn’t put it in resolution form.

2. Be specific. People who make vague goals are much more likely to fail. Set a well-defined goal and write down a plan of attack. For example, vowing to save more is too broad. Instead, make a plan to research savings accounts with higher than average rates, pick one by Feb. 1, and aim to save $3,000 a year, putting away $250 a month to get there. (For help, check out our annual list of the Best Banks and accounts.)

3. Keep a log. One key to sticking to your New Year’s pledge: track your progress. Two-thirds of those who set a goal find progress to be motivating, according to the Fidelity survey, and a study from the University of Washington found that the more that you monitor your performance, the better you’ll do at sticking to your goals. Use an app such as SavingsGoals to see how close you are coming to your savings target or DailyCosts to track your spending and see where you can cut back.

4. Enlist a buddy. Research from Dominican University of California psychology professor Gail Matthews found that people who shared their goals with a friend were 33% more successful than those who didn’t. So if you’re already contributing to your 401(k) but haven’t boosted the amount you’re saving in years, tell someone who is important to you that you’re going to do it. Then ask that person to call you in a week to see if you followed through. Make a pact to help your friend with his or her own goal, and you’ll both be more likely to achieve your resolutions in 2015.

Have you had success with your New Year’s resolutions? Write me with your tips and advice at drosato@moneymail.com, and I’ll share the best ideas in an upcoming post.

MONEY best of 2014

6 New Ideas That Could Help You Retire Better

Lightbulb in a nest
MONEY (photo illustration)—Getty Images (2)

A great new retirement account, the case for an overlooked workplace savings plan, a push to make your town more retiree-friendly, and more good news from 2014.

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.

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