An investment is an asset or item that is purchased with the hope that it will generate income or appreciate in value at some point in the future. … An investment can refer to any mechanism used for generating future income, including bonds, stocks, real estate property, or a business, among other examples.

After establishing how much to save, it’s time to figure out what to invest in. There’s a lot to consider when building a retirement portfolio, and we’ll take you through some of those details below. But here are some of the most common products investors choose for retirement.

If you’re saving for retirement in your company’s 401(k) or a similar employer plan, it’s worth noting that not all of these investments may be available. But you can gain access to the other types of investments you desire by using different retirement accounts.

When selecting investment products, it’s important to keep the big picture in mind. Take into consideration your goals, risk tolerance and time horizon, or the length of time you have to invest prior to reaching your goal. Together, these factors point you to the optimal asset allocation for your total investment portfolio. If you have multiple investment accounts, you’ll want to consider them all when evaluating your asset allocation.

Investment Vehicle 

• Stocks
• Bonds
• Mutual funds
• Index funds
• Exchange-traded funds (ETFs)
• Options
• Annuities
• Life Insurance
• REITs

ANNUITY

An annuity is a contract between you and an insurance company that requires the insurer to make payments to you, either immediately or in the future. You buy an annuity by making either a single payment or a series of payments. Similarly, your payout may come either as one lump-sum payment or as a series of payments over time.

Annuities are flexible products and, depending on the type, can meet needs for protected lifetime income, growth and downside protection.

Types of Annuity

• Fixed Annuity– The insurance company promises you a minimum rate of interest and a fixed amount of periodic payments. Fixed annuities are regulated by state insurance commissioners. Please check with your state insurance commission about the risks and benefits of fixed annuities and to confirm that your insurance broker is registered to sell insurance in your state.
• Index Annuity– This annuity combines features of securities and insurance products. The insurance company credits you with a return that is based on a stock market index, such as the Standard & Poor’s 500 Index. Indexed annuities are regulated by state insurance commissioners.
• Variable Annuity– The insurance company allows you to direct your annuity payments to different investment options, usually mutual funds. Your payout will vary depending on how much you put in, the rate of return on your investments, and expenses. The SEC regulates variable annuities.
• Income Annuity- An income annuity is an annuity contract that is designed to start paying income as soon as the policy is initiated. Once funded, an income annuity is annuitized immediately, although the underlying income units may be in either fixed or variable investments. As such, income payments may fluctuate over time. An income annuity, also known as an immediate annuity, a single-premium immediate annuity (SPIA), or an immediate payment annuity, is typically purchased with a lump sum payment (premium), often by individuals who are retired or are close to retirement. These annuities may be contrasted with deferred annuities that begin paying out years later.

Why should you buy an Annuity?

• Principal Protection
• Income for life
• Tax-Deferred 
• Long Term Care
• Legacy

Annuities are insurance-based financial vehicles that can provide many benefits sought by retirement-minded investors. There are a number of reasons why people buy annuities.

By investing your money in stock market indexes, an index annuity can have a decent long-term return, potentially better than what’d you receive through a bank certificate of deposit (CD), fixed annuities and savings accounts. The index annuity protects your savings against losses, making it a relatively safe investment. You get some market upside with less of the risk. Your contract could lock in your gains periodically, like once a year. That way you don’t have to worry about future market downturns erasing your earnings. The historic long-term return of the stock market is higher than inflation, so index annuities can protect the future buying power of your savings.

Deferral of taxes is a big benefit, and so is the ability to put large sums of money into an annuity more than is allowed annually in a 401(k) plan or an IRA — all at once or over a period of time.

Annuities offer flexible payout options that can help retirees meet their cash-flow needs. They also offer a death benefit; generally, if the contract owner or annuitant dies before the annuitization stage, the beneficiary will receive a death benefit at least equal to the net premiums paid. Annuities can help an estate avoid probate; beneficiaries receive the annuity proceeds without time delays and probate expenses. One of the most appealing benefits of an annuity is the option for a guaranteed lifetime income stream.

When you purchase an annuity contract, your annuity assets will accumulate tax deferred until you start taking withdrawals in retirement. Distributions of earnings are taxed as ordinary income. Withdrawals taken prior to age 59½ may be subject to a 10 percent federal income tax penalty.