If you qualify, you should take advantage of this retirement opportunity. These accounts provide safety of principal but relatively low income. These are issued by insurance companies and provide tax-deferred income and a guarantee of investment principal. These are issued by insurance companies and provide tax-deferred income that is based on the performance of the underlying investment choices. Bonds reflect a loan made by the investor to a corporation, the U.S. government, or municipal governments.
Bonds provide a high level of income with little chance of appreciation over time.
Stocks pay dividends from the corporation's profits, which can increase or decrease over time, depending on the business operations of the corporation. Investors turn over their money to a fund manager who pools the assets and invests them for a particular purpose. Mutual funds typically focus on a particular type of stock or bond investment. Mutual funds' income and growth prospects depend on the types of investments that they hold. Any investment program that includes stocks and bonds involves some degree of risk.