• Employers began offering the Roth 401k retirement account in 2006 as an alternative to the traditional 401k. Only employees whose company offers a Roth 401k are able to participate. The Roth 401k is usually best for people who expect to be in a higher tax bracket at retirement because of the tax advantages the account offers.
  
  

Tax Advantages

• A Roth 401k account does not allow contributions to be made with pre-tax dollars like a traditional account. Once the money is in a Roth 401k plan, the money grows tax-free and, as long as you wait until you are able to take a qualified distribution, the money comes out tax-free at retirement. The tax-sheltered nature of the account helps your money grow faster because none of the earnings are taken out for taxes.
  
  

Cannot Accept Matching Contributions

• If your company offers a 401k matching contribution for money you put into your retirement account through the company, the matching contribution cannot be added to a Roth 401k. The company is still allowed to put money into a retirement on your behalf as part of a matching program, but that money must be deposited into a traditional 401k account, not a Roth 401k.
  
  

No Income Limits

• There are no income restrictions for participation in a Roth 401k plan like there are for participation in a Roth IRA. The contribution limits for a Roth 401k plan are also significantly higher than a Roth IRA. The contribution limits change each year to adjust for inflation. For 2010, the contribution limits are $16,500 if you are under age 50 and $22,000 if you are 50 or older.
  
  

Required Minimum Distributions

• Roth 401k accounts have the same required minimum distributions required of traditional 401k accounts. Starting at age 70 1/2, you must start taking money out of your account. The amount that you have to withdraw each year is calculated from the IRS life-expectancy tables and the money in your account.
  
  

Loans

• If you need to access the money in your Roth 401k plan before age 59 1/2, you can take out a loan, rather than taking an unqualified distribution. The maximum amount you can borrow from your Roth 401k plan is the lesser of 50 percent of your account or $50,000. These loans have a five-year repayment period. If you do not repay the loan within this time frame, the unpaid amount will be considered distributed and you will have to pay taxes and penalties.