You have two funding options in a 403(b) plan: annuities and mutual fund custodial accounts. Annuities are financial contracts with an insurance company that can be used to accumulate assets for retirement or to provide you with a stream of income in the future, usually when you retire. Annuities may be fixed or variable. A custodial account is one where an agent, bank, or other financial organization holds your account for you. If you fund your 403(b) account with mutual fund investments, your employer will set up a custodial account for you.

Both variable annuities and mutual funds carry investment risk. That risk will vary with the investment decisions you make. Keep in mind that with any investment there is a risk-reward relationship. In general, the lower the risk, the lower the return. With higher investment risk, there is the potential of higher return.

Variable annuities and mutual funds are offered with a document called a prospectus. The prospectus for a variable annuity describes the features, risks, charges and expenses of the contract. The prospectus provides additional information for publicly available mutual funds as well as for mutual fund investments in a variable annuity contract. In these cases, the prospectus also describes the investment objectives.

You should consider all information in the prospectus carefully before you invest.