Saving for retirement is one of the most important things that anyone can do for themselves. Building a nest egg should become increasingly in focus as one age, and one of the biggest questions that come up is whether to place money into an IRA or a 401(k). While a case can be made for both of these types of accounts, you can get a lot of mileage out of gaining a more thorough understanding of how they work so as to choose the right option for you.

So, which is right for you — an IRA, or a 401(k)?

Here are a handful of things to consider, all of which can help you make the right decision for your retirement.

IRA

The IRA, or individual retirement account, is one of the best options for saving available today. This tool — created by the federal government — allows account holders to fund their retirement during working years. Those under 50 years of age can currently contribute a maximum of $5,000 pre-tax dollars each year, while 50+ individuals can contribute $6,000 annually.

There are two distinct types of individual retirement accounts — Traditional IRAs and Roth IRAs.

Traditional IRA

The traditional IRA is a tax-deductible account, meaning whatever you make for contributions will be deductible on your federal income tax for that year. One of the benefits of going with one of these accounts is that the money that does get contributed is considered tax-deferred until you decide to withdraw it, which ideally should be after you reach the full retirement age. While it sits in the account, your money continues to grow—tax-free.

Despite the benefits of a traditional IRA, detraction exists, too. Your adjusted gross income (AGI) will largely determine how much you’ll be able to deduct, which means that contributions may be only partially instead of fully deductible in the long run. Another drawback is the 10% penalty, which applies to anyone below the age of 59.5 who would like to withdraw money from the account. While exceptions such as education and home buying expenses do exist, early withdrawals will almost always be subject to a 10% fee.

Retirement Nest Egg

Roth IRA

The Roth IRA is considered by many experts to be one of the finest vehicles for retirement available today. Because Roth IRAs are funded with after-tax money, they grow tax-free, which means you don’t have to pay a dime in taxes once it comes time to withdraw the money. Another advantage of this type of account is that required minimum distributions (RMDs) do not apply, allowing you to keep your money in the account past the age of 70.5 to continue growing.

As with traditional IRAs, the Roth variety does come along with AGI restrictions. For those who file over $120,000 as single or jointly file over $177,000 as married, Roth IRA contributions aren’t allowed at all. Another stipulation of the Roth IRA is that the money be left in the account for at least five years and cannot be touched until you reach the age of 59.5. Otherwise, a 10% fee on earning distributions will be applied.

For most people, the Roth IRA serves as a better option than a traditional IRA when it comes to saving for retirement. Higher wage earners, however, may not have a choice but to stick with a traditional IRA.

401(k)

If you have the luxury of being able to opt into an employer’s 401(k) plan, you may well want to take advantage of it. 401(k)s generally come along with high contribution limits, to the tune of $18,000 per year in 2017. Income tax deduction can also occur during the pay-year, which helps to automate the taxation process and tends to make things easier for the employee overall.

You don’t have to deal with capital gains until the time of withdrawal, and emergency withdrawals can be made in times of crisis if need be. Best of all, your employer may offer to match your contributions — essentially free money, no matter how you look at it.

Of course, 401(k) plans aren’t perfect. Flexibility and options aren’t strong points, and income is taxable upon withdrawal. Once one reaches the age of 70.5, required minimum distributions (RMDs) must be made, which can easily result in being hit with an elevated rate of taxation. While there are some strategies to help you distribute your RMD, it would be wise to discuss your options with a financial planner.

Finally, employers often set in place a six month or longer waiting period for new employees hoping to start a 401(k), whereas an IRA can be set up immediately.

Which Retirement Plan Is Right For You?

Choosing between an IRA and a 401(k) isn’t always easy. For those who rely on the “gig economy” or have built their own business, an IRA — particularly a Roth IRA — will generally be the strongest option. Traditional IRAs are still great retirement plans for anyone earning a high income and should be looked at when a Roth IRA isn’t an option due to income limitations.

If your employer is offering a 401(k) plan with matching, however, it’s difficult to advise against signing up if the terms are right. After all, this is the only retirement plan that literally provides you with free money, regardless of how much interest can be built in a different type of account.

Choosing between an IRA and a 401(k) isn’t easy, but one option is most likely going to be better for you than the other. Weigh the pros and cons of each, and the decision will eventually make itself.

To learn more about investing in gold with the U.S. Gold Bureau, which offers a 100% authenticity guarantee on all purchases, request a free investors guide.