The standard advice is to consider whether your tax bracket will be higher or lower in retirement. If you are likely to be in a higher tax bracket, you'll usually benefit from the Roth options, because you are paying taxes at a lower rate now. If you're likely to be in a lower tax bracket, you may benefit more from the traditional IRA and 401(k) plan, because you'll pay taxes at a lower rate after retirement.

Most people naturally assume that their tax rate will be lower in retirement, since their income will typically be lower. That assumes that income tax rates will stay constant over that time period, even though tax rates are at historically low levels. However, many believe that income tax rates have no where to go but up.

Thus, it may be prudent to use tax diversification for your portfolio. Tax diversification attempts to protect your portfolio against tax rate fluctuations. It is a concept similar to asset allocation, where you protect your portfolio against price fluctuations. With tax diversification, you invest in a number of investment vehicles with different tax ramifications. For instance, you might invest in a Roth IRA, where qualified distributions can be taken with no tax consequences; a 401(k) plan, where you save taxes now and pay ordinary income taxes of up to 35% on qualified distributions; and taxable accounts, where the capital gains tax of a maximum of 15% must be paid on sales of appreciated investments. Thus, during retirement, you can monitor your tax situation and withdraw money from the assets that make the most sense in any particular year.