Starting in 2006, employer-sponsored retirement plans allowed Roth-type contributions. In other words, the benefits of a Roth IRA became available in some 401(k)s and 403(b)s. Previously, you could only make pretax (or deductible) contributions to these plans. For many young people, Roth 401(k) is an attractive option.

How is a Roth 401(k) different from a Roth IRA? For starters, you can make a larger contribution into a Roth 401(k) account. You can allocate the maximum 401(k) contribution ($15,500 in 2007) toward Roth-type dollars. However, you can also mix and match your contributions — putting 5 percent of your pay in pretax and 5 percent of your pay in post-tax, for example. In addition, you can contribute to a Roth 401(k) regardless of how high your income is.

Roth 401(k) simply adds an additional “bucket” of money to your retirement plan. Your investment mix doesn't change — it's just the tax treatment that changes. If you leave your job, your money is still portable. However, you have to keep Roth-type money separate from traditional (deductible) money. For example, you'd roll your Roth 401(k) money into a Roth IRA, and you'd roll your traditional money into a traditional IRA.