NEW HAVEN, Conn. (WTNH) – Wondering what the best plan is when it comes to a retirement account?

When it comes to planning for retirement, there are two categories: plans available through your employer or plans you make on your own.

“When it comes to plans typically offered through an employer, they can include a 401(k), 403(b), SEP IRAs, or SIMPLE IRAs,” said chartered financial consultant John Castera,

And, of course, you also have individual accounts.

The big question though, is how are they taxed?

Are they traditional plans, where the money that is put into these plans is coming off of our taxable income? This means the tax break would be seen immediately, but income tax has to be paid when you take that money out in retirement.

Or, is it a Roth IRA plan where you are going to pay that tax immediately, and ultimately enjoy tax-free income in retirement?

So, if you have both options, which is best?

The answer is that you have to take a look at your situation. Ask yourself, what’s available to you? Because some of these plans have income limitations, so you also have to take a look at your tax bracket.

Do you need that tax break immediately, or are you in a low tax bracket and anticipate being in a higher tax bracket?

Caserta stated that in general, the younger you are the longer you have until retirement so the more advantageous a Roth plan is going to be. This is because typically, he says, you are going to end up in a higher tax bracket than where you are now.

This means any money put into a Roth plan can be taken out without penalties.

With a regular plan or traditional plan, if you put that money in but take it out before you are 59 and a half years old, you’re going to get taxed and penalized on it.

You can also usually do both, which Castera calls “diversifying a tax strategy,” since we don’t always know how Roth plans will be handled down the road.