some people are saying Roth IRA and some are saying Traditional IRA. How do I know which is right? Can someone maybe give me some scenarios?
There's a lot of research out there for Roth vs. Traditional IRAs (and 401ks). And you will find differing opinions there, as well. You will always find that. But here's your example:
If you have $5000 to put into an IRA, you could:
1. Put it into a Roth IRA (or Roth 401k). It grows tax free and you will never have to pay tax on the withdrawals. However, you paid 25% on your contribution for that right.
2. Put it into a Traditional IRA (or 401k). You receive a tax deduction on your tax return for $5000*25%= $1250. You could then reinvest that $1250 into the IRA so you had $6250 invested instead of the $5000 invested in the Roth. However, whenever you withdraw the money, you will have to pay taxes on it.
You don't know what your taxes will be in the future, that is the main reason why there is varying opinions. I'd say the majority of financial planners would agree that money in the 25% tax bracket is better served by using a Traditional account, but everyone does not agree. Here is a popular article that people reference, but it is geared toward early retirement.
http://www.madfientist.com/retire-even-earlier/There are a some advantages of a Roth IRA over a Traditional IRA, but there are very few advantages of a Roth 401k over a Traditional 401k. At a minimum, I'd suggest changing your 401k contributions to Traditional.