0 building a better mousetrap. When it comes to retirement plans, there are those who see a good thing and ask why it can't be better. Beginning in 2006, an interesting new option became available: the Roth 401(k). Not surprisingly, it has features of both a Roth IRA and a traditional 401(k) plan. On the plus side, it is an after-tax account without the income limits of a Roth IRA. It has the higher contribution limits of a traditional 401(k). Neither contributions nor earnings are subject to tax upon withdrawal if the plan owner is at least 59½ and has held the account for a minimum of five years, as with a Roth IRA. One important feature that distinguishes the Roth 401(k) from a Roth IRA is the distribution requirement. Unless the law changes, minimum distributions must begin no later than age 70½.

John E. Buckley, an economist with the Division of Compensation Data Analysis and Planning at the Bureau of Labor Statistics in the U.S. Department of Labor, has prepared the following table, which compares the new Roth 401(k) with the Roth IRA and traditional 401(k) plan.