Roth 401(k) is a great way to save for retirement. Applicants can take distributions from a Roth 401(k) account under certain conditions during retirement or while working. It allows you to contribute to your 401(k) account on an after-tax basis, and also you have to pay no taxes on qualified distributions when the money is withdrawn.

Contributions to Roth 401(k) plan are made after-taxes and you can withdraw money at the age of 59 ½ without facing penalties or taxes. But there is a condition that you have to hold the account for at least five years. The maximum contribution for year 2010 which is calculated on an annual basis is $16,500.

If your age is 50 years or more, then you may be eligible to a ‘catch-up’ provision that allows you to contribute even more to your account (additional up to $5,500). Roth 401(k) and Traditional 401 (k) contributions are merged in order to calculate the contribution limit.

If you withdraw money before the age of 59 ½ or from your Roth 401(k) accounts which is less than five years old, then you have to pay no tax on the after-tax contributions (i.e. the principle amount), but you have to pay income tax on the earnings along with a 10 percent penalty.