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Understanding Retirement Investment Options

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Table of Contents

As you plan for retirement, it's important to familiarize yourself with the variety of tools available to help fund your goals. You can use multiple types of strategies to manage your money and how it's taxed.

Of course, things can get complicated quickly, so it's wise to learn the basics about your retirement investment options as you build a portfolio. Here's what to know.

Account Types

Several investment accounts are designed specifically for retirement, and those accounts have unique features that could be helpful as you save for your future. In many cases, it makes sense to use more than one type of account.

Keep in mind that any sort of retirement investment requires you to be mindful of tax rules. It's wise to discuss these options and the requirements with a financial professional to determine what makes the most sense for you. In addition, know that any investments you make do not guarantee growth and have the potential for both gains and losses.

Pre-Tax & After-Tax

You can typically use pre-tax savings accounts if you want to reduce your tax bill today, although you will eventually have to pay taxes when you withdraw funds. You may also have the option to use after-tax Roth savings vehicles. Those accounts don't provide an immediate tax benefit, but you can potentially qualify for tax-free withdrawals in retirement.

MORE What Are the Differences Between a Roth IRA & Traditional IRA?

Employer Retirement Plans

One of the most well-known retirement accounts is an employer-sponsored 401(k), but there are other similar plans, such as a 403(b) or 457(b). All these accounts allow you to save money for the future. It's critical to view these as long-term investments. That said, some plans allow you to take money out while you're still working, although you may need to meet specific requirements.

MORE What's the Difference Between a 401(k) & IRA?

Individual Retirement Accounts

An individual retirement account (IRA) is an account you can open and manage on your own. Because of that, these accounts offer maximum flexibility when it comes to investment options and strategies. But IRAs restrict withdrawals, and taking money out before age 59½ can result in penalties.

Taxable Accounts

Taxable accounts are typically free of many of the restrictions that come with other retirement accounts. You can add as much as you want to your savings each year, and you can generally withdraw funds at any time without tax penalties. Still, you may pay tax on gains or earnings in your account, so it's important to be tax-savvy when using these accounts. Taxable accounts may be appropriate when you need income before retirement accounts are freely accessible.


Annuities are insurance contracts that may offer guarantees and tax-deferred growth. For example, in exchange for a premium, an annuity might include an income guarantee that pays you for as long as you're alive. While an annuity itself is not an investment, some annuities allow you to choose account options for investments inside of your contract.

Annuity guarantees are tied to the insurance company you purchase the policy from. It's critical to use financially strong companies, as there is no government guarantee behind the insurance company's promises.

Annuities are best viewed as vehicles for long-term goals. Any withdrawals before age 59½ may incur penalties, and you may need to keep funds in your contract for an extended period to maximize your benefits.

MORE How to Plan for Retirement

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Investment Options

In addition to choosing from different types of accounts, you can often select investments inside of those accounts. It may be wise to diversify by spreading your assets out into a variety of areas. Here are some to consider.

Mutual Funds

Mutual funds allow you to buy a single investment that can provide exposure to numerous underlying investments. As a result, diversifying your holdings is relatively easy.

Mutual funds typically have an investment objective, so it's important to understand each fund's strategy and choose funds that align with your goals. For example, some funds offer an all-in-one approach for aggressive or moderate growth. Other funds invest in a narrow slice of the market, such as large companies based in the U.S.

Exchange-Traded Funds

Exchange-traded funds (ETFs) provide diversification and a variety of investment objectives. ETFs are passively managed and tend to follow one or more market indices. Because ETFs are passive, costs may be lower than more actively managed investments.

For most long-term investors, the ability to trade ETFs during trading hours may not matter, but for some, this may be an attractive feature.

Other Investments

There is a broad universe of investment options available. For instance, investments inside of variable annuities might be of particular interest in retirement planning. Depending on your goals, you might select an annuity with account options for investing in securities. You can often choose from strategies that range from conservative to aggressive so that your investments match your risk preference. Keep in mind that the investments inside of a variable annuity are subject to market risk. Your investment could be worth more or less than the principal amount invested.

Other annuity strategies are index-linked, providing limited exposure to market gains (if any) while protecting against losses. Ask a financial professional for details on these approaches as you explore your options.

There is a wide array of accounts and investment options available to choose from when considering retirement investment strategies. You don't have to choose a single option, and it often makes sense to combine strategies for a robust plan. By doing so, you can better balance long-term growth objectives against the need for an ongoing lifetime income.

Live More & Worry Less

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We have financial professionals ready to assist you on your retirement journey.

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Information provided is general and educational in nature, and all products or services discussed may not be provided by Western & Southern Financial Group or its member companies (“the Company”). The information is not intended to be, and should not be construed as, legal or tax advice. The Company does not provide legal or tax advice. Laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of this information. Federal and state laws and regulations are complex and are subject to change. The Company makes no warranties with regard to the information or results obtained by its use. The Company disclaims any liability arising out of your use of, or reliance on, the information. Consult an attorney or tax advisor regarding your specific legal or tax situation.