Retirement is a portion of everyone's financial life, and your personal planning and preparation define whether this is a pleasant time in your life. There are many ways to help you save for retirement, and a Roth 401k plan is one of them.

Function

A Roth 401k plan allows you to save your money for retirement, tax free. There are no income limits, and contribution levels are higher than for traditional Roth IRAs.

History

Although created as temporary legislation lasting from 2006 to 2010, the 2006 Pension Protection Act made the Roth 401k permanent. Not all employers have adopted Roth 401k plans, but they are not difficult to add to a business financial portfolio.

Benefits

A benefit of a Roth 401k is that retirement contributions are taken out of your paycheck after taxes, so your gross income is not reduced like it is with a traditional Roth IRA. In itself, that is not a benefit. But because of this, Congress has decided that most or all of the distributions you take from your Roth nest egg during retirement will be tax free.

Size

For the years 2009 and 2010, the maximum amount an individual under the age of 50 can contribute to their Roth 401k is $15,500. This amount increases to $20,500 for people ages 50 and older.

Considerations

You can choose to invest your money in both a Roth IRA and a Roth 401k, or just one of these options. You should discuss these options with your financial adviser, as well as with your employer.

Source:

MyDollarPlan.com: Rock 401k: What is it?

Simple401K.com: Roth 401K Plans

Roth 401k Website: Purpose

More Information:

CNN Money: To Roth or Not to Roth 401k?