I would suggest using your employer sponsored 401(K) and take advantage of any matching that is offered by your company. After that, if you have free cash flow and fall underneath the income threshold, I would suggest saving into a Roth. If you are a young professional with a high salary such as doctor, dentist or lawyer, you may not be able to contribute to a Roth IRA but should check to see if your company offers a Roth 401(k).
Imagine you are a farmer and it is time to plant your crop. Uncle Sam offers you a choice, you can pay the tax you owe on the current value of the seeds you are about to plant or you can wait six months and pay the tax on the value of the crop. Most people would see the wisdom in paying it on the lower value of the seeds today. That is the same option you have with a traditional IRA and a Roth IRA. Pay the taxes on the lower amoount of money going into the Roth today, or pay taxes on the much larger value in the Tradtional IRA later.
Visit a local independent financial planner and look at the numbers.
The information provided should not be interpreted as a recommendation, no aspects of your individual financial situation were considered. Always consult a financial professional before implementing any strategies derived from the information above
Julian and Don gave you some great advice. And for getting started at an early age, a Roth (either IRA or 401k) is a great first step.
But let's face it, you can't predict what your future earnings or tax rates will be. And unless you have a crystal ball, it's impossible to know what the best approach will be 40 years from now when you retire.
This can be hard to do, but try to imagine your life in retirement, and specifically replacing your paycheck with other sources of income. You need options for doing that in the most tax efficient way possible, which means you need three distinct buckets of money: 1) tax exempt, 2) tax deferred and 3) taxable.
With a Roth (tax exempt bucket) there's no upfront tax break, but in retirement you don't owe any tax on withdrawals. The same is not true of traditional IRAs (tax deferred bucket), because you got a pass from Uncle Sam on the contribution, you owe taxes when you take out your money. Individual accounts (taxable bucket) get no up front break, but offer capital gains rates which are preferable over earned income rates.
At your stage of life, the key is to just GET STARTED. Can you make the argument that the Roth probably is best for a young person long term? Yes, but if you told me you absolutely need the tax savings now, then open a traditional IRA. Either choice you make, you're headed in the right direction. And by the way, the kinds of investment you would ideally own in each tax bucket are not the same.
But that's for a different post!
While all of this is good advice, lets not lose the Forrest for the trees. What's most important is your savings rate and asset allocation. Next to those decisions the Roth/IRA decision is insignificant. A young professional saving 14% of income using an 80% equity portfolio will - 30, 40 years from now - run circles around one that defers 4% in a 40% equity portfolio- weather its pre-tax, post tax or anything in between. Get the deferral amount and allocation right, stay disciplined- and it will all work out just fine.
If you are in your 30's or early 40's, it's usually better to choose Roth over IRA. But before you choose anything make sure you are not giving up something of larger value, such as: 1) If your company plan provides a match, make sure you participate there, 2) Make sure you have a plan to build/replenish emergency savings, 3) Make sure your debts are decreasing.
There is nothing worse than working hard to build retirement funds, then to be forced to liquidate them for emergencies. I recommend a balance that makes you feel in control, and prepared for surprises.