Hello and welcome to Moneygirls quick and dirty tips for a richer life.

Today's topic, the Roth 401k.

A Roth IRA can be an excellent retirement savings vehicle because your earnings get to grow tax-free.

You contribute after-tax money, but you don't pay tax on the earnings later.

A Roth IRA can be a really smart choice if you're younger or think you'll be in the same or higher tax bracket in retirement than you are now.

In episode 4 on investing for retirement,

I briefly mentioned the Roth 401k,

but I didn't have time to go into any detail. I want to tell you some more about it now.

Think of the Roth 401k as a supercharged Roth IRA. A Roth 401k combines the benefits of a 401k with the benefits of a Roth IRA.

Available for the first time last year, a Roth 401k lets you put away much more than you could with a Roth IRA.

With a Roth IRA your annual contribution is limited to $4,000, plus an additional $1,000 if you're age 50 or older.

In contrast, with a Roth 401k, the 401k contribution limits apply.

For 2007, you can contribute up to 15,500 plus an additional 5,000 if you're 50

or older.

Best of all, because a Roth 401k is just that a Roth, your earnings get to grow tax-free, which is pretty incredible.

Unlike a Roth IRA, the Roth 401k doesn't have any income restrictions.

You heard that right, no income restrictions.

So if you've wanted to contribute to a Roth IRA, but haven't been eligible because

your income is too high, a Roth 401k is a great solution.

I've said it before, but it's worth repeating.

If your employer doesn't have a Roth 401k, let them know you'd like one and ask them to consider

offering it.

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