So, you decide you're ready to buy a new car. You visit a showroom and the salesperson asks you a series of questions. Sedan or coupe? Manual or automatic? AM/FM stereo or satellite? Of course, you can't make such decisions without first understanding each option. Only then can you be sure to drive off in the vehicle that best fits your needs.
Investing for your future is no different. A simple understanding of the basic investment options can help you make smarter decisions about how you invest your money. Only then can you be sure you've chosen the right vehicle to meet your personal investing needs.
Employer-sponsored retirement plans are considered one of the most effective retirement savings plans. They are commonly known as deferred-compensation plans. The A&M System offers both a 403(b) and a 457 deferred-compensation plan. Typical features include:
Employer-sponsored retirement plans typically offer different investment options and contribution limits. Note that early withdrawals are generally permitted from most plans; however, a penalty is usually involved, as well as ordinary income taxes.
An Individual Retirement Account (IRA), is similar to an employer retirement plan, but you set it up for yourself. Typical features of an IRA include:
IRAs come in many forms, with different features, benefits and contribution limits. Options for transferring a former employer retirement plan into an IRA are available as well.
An annuity is an insurance contract and a securities investment that provides regular periodic payments for a specified period of time. Features of annuities include:
Note that with the guaranteed minimum income option, if you die prior to the end of the annuity phase, your investment may affect the value of your death benefit. All guarantees with annuities are based on the claims-paying ability of the issuing company.
Annuities are available with a wide range of options and possibilities, each serving different purposes for different types of investors. Fixed annuities, for example, offer investments with a guaranteed rate of interest for a specified time period; variable annuities typically offer a range of investment options, allowing you to be more aggressive or conservative.
A mutual fund is an investment vehicle managed by a professional money manager that allows a group of investors to pool their money together with a predetermined objective. Mutual funds range from conservative investments, such as money market funds, to those that invest in more aggressive options, such as new technologies and emerging markets. Among the benefits of mutual funds are:
With the right fund management company, mutual funds could provide a good investment opportunity that could complement an employer-sponsored retirement plan or IRA.
Government bonds and Certificates of Deposit (CDs) are two similar investments that are considered less risky (historically) than most other traditional investment vehicles. They're defined as:
While history does not guarantee future results, government bonds and CDs can help add stability to almost any portfolio by balancing your higher-risk investments. These types of investments are also appropriate if you have a short span of time before you'll need your money, such as retirement or sending a child to college.
Employer-sponsored retirement plans, IRAs, annuities, mutual funds, bonds and CDs are a few of the many investment vehicles that are available to you. Your financial representative can help you learn more about each of these so you can be sure you pick the right vehicles for your needs and goals. 
This article is part of an ongoing series of articles regarding retirement savings. The information has been provided by various A&M System Optional Retirement Program and Tax-Deferred Account Program vendors and Securities and Exchange Commission educational articles.