Retirement Investment Options in the U.S.

With a living cost that keeps rising, it is mandatory that you think about how to save money, and if it’s possible while enduring little risks and high returns. You need to fit together the best way you can incomes and lifestyle goals so that you become able to make yourself comfortable during your retirement years. The whole idea is about preserving the money you already have, and the earlier you start saving for retirement, the more money you will be able to have for sure in the future. That said, it is never too late to start planning for retirement, and we are here to give you some helpful advice. In order to make the plan efficient, you must be ready to sacrifice some returns to lower the risks. You must learn how to balance risk and return. Here is a list of the most popular investment options to consider.


Annuities are financial products that pay out a fixed stream of payments to an individual, primarily used as an income stream for retirees. Payments are provided monthly, quarterly, annually or by a lump sum payment during retirement. They are created and sold by financial institutions or through your broker. Their job is to accept and invest funds from people and, upon annuitization, give a stream of payments later. Once the payments start, the contract enters the annuitization phase.
The pros: You get tax-deferred growth of earnings. No annual contribution limit. A regular and consistent income source during retirement.
The cons: very high expenses, potential early withdrawal penalties, and payments may be taxed as regular income and you don’t get an extra death benefit.


Bonds are actually just debt securities where you invest money to an issuer on a loan basis, it can be a company or the government. Once you buy a bond, you extend a loan to the bond issuer for a certain period of time. In exchange for the loan, the issuer pays you a specified interest rate regularly (it is also called the coupon rate). When the bond reaches the full term, the issuer should repay the loan (or full value) on the bond. You may find them on the Over-the-counter (OTC) markets including securities firms, banks, brokers and dealers. Some of the corporate bonds are listed on the New York Stock Exchange. U.S. government bonds and can be purchased on a program called Treasury Direct.
The pros: some bonds have no risk, some are tax exempt and many are an even low risk. The benefit is you know the return on your income and often it will have better returns that other short term investments.
The cons: It’s possible they could default and you would receive no return but this is uncommon. If you sell before the bond matures can also incur penalties..

Cash Investments

Cash investments are generally low-risk and can range in the time frame of the investment. They provide returns via interest payments. You can invest directly through financial institutions, your broker, your local bank or credit union.
The pros: they are easily redeemable, and often FDIC insured. They also are low- to no-risk.
The cons: they have a low return and can include withdrawal penalties.

Direct Reinvestment Plans (DRIPs)

DRIP is a plan proposed by a company. It allows you to automatically reinvest any cash dividends by purchasing more shares or fractional shares on the dividend payment date. Instead of receiving your quarterly dividend check, the company, transfer agent or brokerage firm managing the DRIP puts the money, on your behalf, directly towards the purchase of extra shares. Many DRIPs offer you the chance to start with a very small number of shares or low dollar amount and they support fractional shares.
The pros: this is a convenient means of reinvesting, it is also often commission-free and you may get a discount on purchases.
The cons: you always owe taxes on cash dividends even though you never receive the cash.

401(k)s and Company Plans

401(k)s and other company plans (or defined-contribution plans) concern you as an employee. You  contribute to the plan through a payroll deduction each pay period. You are the one who decides what percentage of your salary will be taken and the deduction is taken automatically out of each paycheck. Sometimes, your employer may also contribute to the plan with a matching contribution. To create such a plan, refer to your employer’s Human Resources team or Human Capital department.
The pros:  Often your contributions can be tax-deductible and also may grow tax-deferred. Some employers offer matching contributions (which is essentially free investment capital). If necessary, you can often borrow from the plan (in case of hardship) and pay back into it at a later time.
The cons: you get early withdrawal penalties and annual limits on contributions.

Exchange Traded Funds (ETF)

Exchange traded funds are investment funds that track broad-based or sector indexes, commodities and baskets of assets. They have access to nearly any asset class or sector, so ETFs offer exposure to markets that have traditionally been challenging for individual investors to get into, such as commodities and emerging markets.
The pros: they are very popular because they trade just like stocks on regulated exchanges. ETFs are tax efficient investments, boast low cost ratios, they can be sold short and purchased on margin. They offer diversity in a single investment and provide intraday trading access.
The cons: certain ETFs are taxed at a higher rate and big-ask spreads can be large.

Individual Retirement Accounts (IRA)

You can open an IRA yourself. If you have a spouse, each of you will have an IRA. The important thing to know is that an IRA is not an investment, it is an account where you keep investments such as stocks, bonds, and mutual funds. You get to choose which one you want and can change the investments if you wish. In many cases, you can have more than one type of IRA.
The pros: For traditional you have immediate (deductible) tax benefits and your investments grow tax deferred. There are also a myriad of investment options with differing risk/reward benefits.
The cons: There are limits on annual contributions and some eligibility restrictions, often early withdrawal penalties and you may be immediately taxed on your income.

Stocks (Equities)

Stocks represent partial ownership in a corporation. When you purchase a share of stock you are buying a little piece of the company. Investors purchase stocks for a variety of reasons, including the growth potential, liquidity, and dividend payments. Also, they consistently outperform other investments.
The pros: capital appreciation, diversity and voting rights.
The cons: prices can vary dramatically and you have high risk investment.

Mutual Funds

These are a managed grouping of stocks or bonds that are managed by professional brokers. They divide these groupings into a set shares that are intended to diversify your portfolio.
The pros: Letting professional brokers manage the performance, diversification of.your portfolio, often there’s liquidity and affordability.
The cons: There is a risk vs reward scenario as well as you’re still engaged in stocks and bonds. Costs can be high and your income can be taxed (depending on how you invest).


Your investment options for retirement can change over time to align with your goals, risk tolerance, and investment horizon. Also, retirement planning is not only about finances – you must know when you will retire, where you will live, and what you will do. This is why it is so important that you learn which options are available. Finding the perfect plan for you will take time and effort, and your main task will be to consider an investment’s advantages, disadvantages, risks, and rewards before making any decisions.

What You Need to Know about Financial Retirement Investments

Are you looking forward to retirement? Even if you’re still a few years away from retirement you should already be contemplating the best financial retirement investment options.  By doing so, you will be able to enjoy your retirement years and the fruits of your labor. It also ensures that you don’t have to rely on your kin, the welfare system or anyone else financially.

There are many types of financial retirement investments available but here are the most common:

Individual Retirement Account (IRA)

It is a type of savings account that is meant to help one save up for retirement and provides tax advantages. The types of IRA’s are the following:

  • Traditional IRA – it may be deductible or non-deductible depending on the nature of contribution and withdrawals at retirement are taxed as income while all transactions and earnings have no tax impact.
  • Roth IRA – withdrawals are usually tax-free, all transactions have no tax impact and contributions are done with after-tax assets.
  • SEP (Simplified Employee Pension) IRA – it may be set up by self-employed persons like freelancers, small business operators and independent contractors and follows the same withdrawal taxation rules as a traditional IRA.
  • SIMPLE (Savings Inventive Match Plan for Employees) – it is tailored for small business and self-employed persons, has the same taxation rules like a traditional IRA and all contributions are tax-deductible.


  • You can transfer your IRA funds.
  • It is easy to maintain and you don’t need approval to use your money.
  • You have control on how you invest your savings.


  • Your IRA funds are subject to income taxes and a tax penalty of 10% if you withdraw before reaching the age of 59.
  • You cannot use your IRA funds if you’re planning to secure a loan.
  • Your IRA funds may not be protected from creditors but this depends on a state’s law.

401(K) Plan

It is an employer-sponsored retirement plan for eligible employees and may also include a profit sharing feature. Investments are usually automatically deducted from an employee’s pay check and employers often match the contributions of employees (although this is optional and determined by the employer).


  • With a 401K plan your money grows and is initially tax deductible
  • You only pay taxes once you withdraw it upon your retirement.
  • You will get a significant return of investment if you invest it wisely.


  • You can only withdraw your 401K plan once you reach the standard retirement age of 59.5.
  • It is not FDIC (Federal Deposit Insurance Corporation) insured therefore it is subject to losses if not invested wisely or in the case of a down market.
  • If you withdrawyour 401K plan before retirement age you are subject to a 10% penalty and  pay the taxes of the amount you withdraw

Stocks and Shares

It is a share in a company’s ownership and represents a claim in a company’s earnings.  The more stocks you acquire, the greater your ownership stake in a company.  Your money can grow quickly if you invest it in stocks and shares but with much higher risk.


  • Stocks are liquid which means that they can be bought and sold allowing you immediate access to cash.
  • It has potential for significant gains as compared to bonds and other investment options.
  • You have the freedom to participate in a company’s growth and entitled to its profits and benefits via dividends and capital gains as a stockholder.


  • Stock price can be very volatile and prices can become erratic.
  • Stock values can drop significantly putting your investments at high risk.
  • There are acquisition and sales costs associated with buying and selling.


It is a fixed income investment wherein a corporate or government entity borrows funds from an investor for a certain time at a fixed interest rate.  It is used by states, corporations and governments to finance specific projects and is usually publicly traded on exchanges.  The 3 main categories of bonds are:

  • Municipal bonds – issued by states and municipalities
  • Corporate bonds – issued by companies
  • S. Treasury bonds – referred to as a government treasury along with notes and bills

Advantages of Bonds:

  • It is often liquid and can be sold in large quantities without any effect on price.
  • There is a bi-annual fixed interest payment and fixed maturity lump sum.
  • There is legal protection and bondholders can still retain the recovery amount should a company go bankrupt.

Disadvantages of Bonds:

  • Price changes instantly affect mutual funds that hold the bonds.
  • Bond prices become volatile based on the issuer’s credit rating.
  • It is subject to various risks like credit risk, exchange rate risk, inflation risk and reinvestment risk, among others.


Having a clear understanding of popular financial investment options allows you to decide more clearly on the right investment option that works best for you.  Whether you plan on investing in stocks, bonds, IRA or 401K, what is essential is to invest your hard-earned money wisely so you will be financially independent and be able to enjoy your retirement for years to come.