As the name suggests, a Roth 401(k) combines features of the traditional 401(k) with those of the Roth IRA. It’s offered by employers like a regular 401(k) plan, but as with a Roth IRA, contributions are made with after-tax dollars. While you don’t get an upfront tax-deduction, the account grows tax-free, and withdrawals taken during retirement aren’t subject to income tax, provided you’re at least 59 1/2 and you’ve held the account for five years or more.

The Roth 401(k) can offer advantages to high-income individuals who haven’t been able to contribute to a Roth IRA because of the income restrictions. (Eligibility for 2012 phases out between 0,000 and 5,000 for single filers and 3,000 to 3,000 for those who are married and file jointly). There are no such income restrictions for Roth 401(k)s.

In addition, Roth 401(k) accounts are subject to the contribution limits of regular 401(k)s — ,000 for 2012, or ,500 for those 50 or older by the end of the year — allowing individuals to stock away thousands of dollars more in tax-free retirement income than they would through a Roth IRA. (In 2012, Roth IRA contributions are limited to ,000 a year, or ,000 for those 50 or older.)

The hitch: Those limits apply to contributions to all types of 401(k) plans, so you can’t save ,000 in a regular 401(k) and another ,000 in a Roth 401(k). “There’s no new opportunity to save here, but there’s an opportunity to save with a different kind of tax treatment,” says David Wray, president of the Profit Sharing/401(k) Council of America (PSCA).

Workers who are offered this option face a difficult choice: Contribute to a Roth 401(k) and suffer a cut in take-home pay (since contributions are made with after-tax dollars), or stick with a traditional 401(k) and hope that in retirement, their tax rate will be lower than it is now. Alternatively, they could hedge their bets by contributing to both accounts.

Making a sound decision hinges on your estimation of the taxes you think you’ll pay in retirement, says Michael Kitces, director of financial planning with the Pinnacle Advisory Group in Columbia, Md.

If you expect your tax rate to be the same or higher in retirement than it is now, you might be better off with a Roth 401(k). This is likely to be the case with young people who are just starting their careers and expect their income to increase in the future. “For folks who are in the 15% or 25% tax bracket, it may not be a bad idea to pay those taxes now and never have to worry about what tax brackets might become in the future,” says Kitces. If you’re in your peak earning years, on the other hand, and you figure your tax bracket will be lower in retirement, you’ll benefit from continuing with traditional 401(k) contributions.

In reality, of course, things are much more complicated. For one, no one can predict with certainty what tax rates will be in the future, though the general consensus is that they’re likely to rise to help the government offset growing budget deficits and pay for Social Security and Medicare. That’s one reason why people in the top tax brackets have indicated their preference for the Roth 401(k), says Wray. “They are ready to pay the regular tax now, whatever it is, because the certainty that they won’t have to pay taxes in the future offsets the value of the tax deferral.”

Still have questions about the Roth 401(k)? We thought so. And we’ve gone ahead and answered the most important ones.

1. Who is eligible for a Roth 401(k)?

Anyone whose employer offers it. This is where it gets tricky: Among the major concerns for employers are the costs associated with managing the plan, and educating their workforce about this investment option. According to the PSCA’s Wray, companies are much more likely to offer a Roth 401(k) if their employees indicate that they intend to participate. So if you want a Roth 401(k) option to be added to your plan, make sure to let your employer know.

2. What happens to the employer match?

Employer matches are made with pretax dollars, and the match accumulates in a separate account that is taxed as ordinary income at withdrawal.

3. What are the early withdrawal rules?

Early Roth 401(k) withdrawal rules are subject to the same requirements as traditional 401(k)s, according to the IRS. For specifics on that, see our story “Tapping Your 401(k) Before You Retire.” However, those regulations aren’t set in stone. If your company rolls out a Roth 401(k) next year, be sure to ask your plan manager.

4. What happens if I leave my job?

The Roth 401(k) balance can be rolled over into a Roth IRA.

5. Is the Roth 401(k) option here to stay?

Yes. At one time, the Roth 401(k) option was set to expire after 2011, but it was made permanent by 2006 legislation. So this is a deal you can count on.

Your Spouse Dies on or After April 1 of the Year After Turning 70 1/2 (or any later year)

In this case (assuming you are the sole designated beneficiary of your deceased spouse’s traditional IRA (or SEP) account), here are your options:

Option No. 1: Treat Inherited Account as Your Own

Under this option, you choose to treat the account inherited from your spouse as if it had always been your own account. This is almost always the tax-smart way to go.

First, however, you must take out your deceased spouse’s required minimum withdrawal for the year of death. Only after that mandatory withdrawal has been taken can you claim the account as your own.

Example 1:

Say your husband died this year (2012). You are the sole designated beneficiary of his traditional IRA (or SEP) account. Before you can treat the account as your own, you must take out the minimum withdrawal for this year (the year your husband died). Calculate that amount as if your husband were still alive at year end. (Read on for IRA withdrawal rules.) Then withdraw the calculated amount (or more) by Dec. 31 of this year. (Be sure to reduce the minimum withdrawal amount by any withdrawals taken by your husband this year before he died.)

Next, you should designate the account as your own, by retitling it to show you as the owner rather than the account beneficiary. (You should do this as soon as possible, and at the latest by December 31 of year after the year of death.) If you are under 70 1/2, you aren’t required to take any further minimum withdrawals until after reaching that age. If you are over 70 1/2, your next minimum withdrawal must be taken by Dec. 31 of the year after the year your spouse dies. You should calculate the amount of that minimum withdrawal and the required withdrawals for subsequent years using the new rules, as if you were the original account owner.

Option No. 2: Leave Account in Your Deceased Spouse’s Name

Under this option, you simply leave the traditional IRA (or SEP) account in your deceased spouse’s name. This is generally not the most tax-efficient way to handle an inherited IRA, but as you might suspect, it requires minimal paperwork.

The problem with this option is that your annual minimum withdrawal calculations are made using your single life-expectancy figure as the divisor. In contrast, if you choose option No. 1, you are allowed to use a longer joint life-expectancy figure. That means a bigger divisor, lower minimum withdrawal amounts, and lower taxes. So I recommend option No. 1 in almost all cases.

That said, if you use option No. 2, you must first calculate the minimum withdrawal amount for the year of death. Do this as if your spouse were still alive at year end. For subsequent years, minimum withdrawals are calculated based on your single life expectancy.

Example 2:

Your husband passed away in 2012. You are the sole designated beneficiary of his traditional IRA. Under the rules just explained, you must take a minimum withdrawal by Dec. 31 of 2012. To calculate the amount, follow the minimum IRA withdrawal rules for original account owners. Specifically, use the joint life-expectancy divisor based on the age your husband would have been had he still been alive at the end of 2012.

By Dec. 31 of 2013, you must take another minimum withdrawal. To calculate the proper amount you must first determine the appropriate life-expectancy divisor to use. For the 2013 withdrawal, this depends on your age at the end of 2013. Let’s say you’ll be 68. Use Table I of Appendix C in IRS Publication 590 (Individual Retirement Arrangements) to find the single life-expectancy divisor for a 68 year old, which happens to be 18.6 years. Now divide the year-end 2012 account balance, say 0,000, by 18.6 to come up with your 2013 minimum withdrawal amount of ,440. Take out that amount (or more) by the end of 2013 to avoid the 50% penalty. Your 2014 minimum withdrawal must be taken by the end of that year. The amount will equal the year-end 2013 account balance divided by 17.8 (the life expectancy divisor for a 69-year old). Repeat this process for each subsequent year for as long as you live.

Here’s an important point. You can switch over to option No. 1 at any time after taking the minimum withdrawal for the year your spouse dies. If you make the switch to option No. 1, you can then follow the more taxpayer friendly rules for original account owners.

You Want to Disclaim an Account Left to You by Your Spouse

THE MINIMUM WITHDRAWAL rules state that the final beneficiary for an IRA (or SEP) account can be decided as late as Sept. 30 of the year after the year of the original account owner’s death. That means you have until that date to disclaim (give up your legal right) to an account for which your deceased spouse named you the sole beneficiary. Then the account will go to the secondary beneficiary (often your child) or the next heir in line under your spouse’s will or state law (if your spouse died without a will).

Why would you ever want to disclaim an account? The typical reason is you don’t need the money, and having it would just worsen your estate-tax situation. In this case, it may be better for all concerned tax-wise if the account goes directly to the next person in line. Then that person will have to start taking minimum withdrawals under a separate set of rules for nonspousal inheritors.

Your Spouse’s Estate Is the Account Beneficiary

What happens when the designated beneficiary for your deceased spouse’s IRA (or SEP) account is his or her estate, you are the estate’s sole beneficiary, and you are also the estate’s executor or executrix? In this scenario, you are allowed to roll over the funds in your deceased spouse’s account into a new IRA set up in your own name. Then you can follow the minimum withdrawal rules for spousal inheritors. See:

Your Spouse Dies Before April 1 of the Year After Turning 70 1/2

Your Spouse Dies on or After April 1 of the Year After Turning 70 1/2

When Jim De Lisa’s chain of six furniture stores went belly-up midrecession, the New Jersey father of five found himself in a fix. He was suddenly unemployed and broke, and his credit score, he says, was “in the crapper.” Pushed to the edge by looming house and car payments, he did the unthinkable: He pawned his wife’s ,000 engagement ring. But no one ever saw him visit the pawnshop — De Lisa hocked the 1.7-karat stunner over the Internet.

Is no industry immune to the inexorable forces of technology and gentrification? These days, even the pawn business is going upscale. Pawn merchants say the recessionary credit crunch is bringing in more middle-class clients along with small businesses seeking short-term loans to meet payroll. Jordan Tabach-Bank, CEO of Beverly Loan Co. in Beverly Hills (“Pawnshop to the Stars”), says he’s seen a flood of doctors, lawyers and accountants hocking valuables to keep their kids in private school. There’s a pawn store reality show airing on the History Channel and an iPhone app to help high-tech indigents locate the nearest pawnbroker. If the trend continues, hocking the family jewels may become as mainstream as applying for a credit card.

While pawnshops still charge eye-popping interest rates (up to 25 percent in some states), the once shady industry is rapidly going Disney. Pawn consultant Steve Krupnik says the sector’s three publicly traded chains took cues from traditional retailers, deploying clean-cut employees, suburban locations and efficient technology. “They’ve forced the marginal operators to clean up,” he adds.

Some of the nation’s 13,000 pawnshops lure the (formerly) affluent with private appointments and house visits. In New York, EZ Pawn, an eight-store chain, is placing ads in local magazines. Pawn magnate Craig McCall, whose 13 Oregon and Arizona locations are in traditional shopping centers (two are in former Hollywood Video stores), decorates some shops with wainscoting and leather chairs at the loan desk: “There’s no bars anywhere!” He even tried dressing his associates in shirts and ties, but they got too grubby lugging pawned lawn mowers and power tools. He settled for red polo shirts and khakis.

Perhaps the most intriguing new model is Jim De Lisa’s lender: Pawngo.com, an online pawnbroker backed by .8 million in venture capital. Clients get an online estimate, FedEx their valuables to the company’s Centennial, Colo., office park vault (Pawngo pays the shipping and insurance), and get a loan wired to their bank account within 24 hours. CEO Todd Hills says most of his clients wouldn’t dream of frequenting a pawnshop — they’re hocking Cartier watches, Louis Vuitton bags, even a Picasso. His typical loan runs about ,700, 17 times the 0 pawn-industry average.

The upside: Like all pawn loans, Pawngo transactions are never reported to the credit bureaus. If you default, all you’ve got to lose is your dearly departed mother’s wedding ring. But the price for discretion is stiff; Pawngo’s annual percentage rates range from 48 to 84 percent, depending on loan size. De Lisa says he paid more than ,000 in interest on his 15-month loan worth less than ,000. At least he’s getting the ring back in time for his sixth wedding anniversary. And the experience has him considering new options: “I should open my own pawnshop!”

What he did: Actor Dan Aykroyd gained fame as a member of the original cast of Saturday Night Live, where some of his characters were known for their dubious business ideas (think: Irwin Mainway and his Bag-o-Glass kids’ toys). But in real life, Aykroyd has a profitable venture on his hands Crystal Head Vodka, a boutique spirit packaged in a bottle that resembles a human skull. Since the brand launched in 2008, sales have exceeded million, with more than a million bottles sold.

How he did it: Many celebrities have gotten into the booze biz others include Justin Timberlake and Sean “Diddy” Combs. But Aykroyd’s brand has earned some admiring attention within the liquor industry. While he boasts about his vodka’s ingredients, observers say he’s also been a relentless marketer, appearing at dozens of promotional events and overseeing the design of the eye-catching packaging, inspired by his interest in the supernatural. “It’s not like he put his name on it and left it at that,” says Eric Schmidt, a director of the Beverage Information Group, which tracks the spirits business.

Why he did it: Aykroyd’s first foray into the booze biz was as cofounder of a distributor. Launching his own vodka brand was a logical way to extend the enterprise, though Aykroyd had to tap the college fund for his three daughters to create Crystal Head. “It was all the cash I had lying around,” he says, “so I said to the girls, ‘We’re going into the vodka business!’” But he hopes that in addition to paying dividends now, the project will become a business his kids can take over one day a meaningful alternative, financial pros say, to simply leaving them a large inheritance.

I am tempted to pay the 0,000 balance on my mortgage and live debt-free. How do I estimate the tax benefit of the interest paid on the mortgage?

Gaurav Aggarwal, Andover, Mass.

“Live debt-free” sure has a nice ring to

it. Estimating the tax benefit involves just a few simple calculations and a little help from an online calculator, like the one on SmartMoney.com. The key question to ask: Is what you expect to earn by investing the money likely to be greater than the cost of the mortgage, after the tax benefit? If so, it may make sense to keep it invested, says Lynn Mayabb, a Kansas City, Mo. based financial planner with BKD Wealth Advisors. And while they’re uncommon these days, some prepayment penalties do exist, so be sure to check your mortgage contract.