Mutual funds under a custodial or trust account agreement are intended as long-term investments designed for retirement purposes.  Money distributed will be taxed as ordinary income in the year the money is distributed.  Account values fluctuate with market conditions, and when surrendered the principal may be worth more or less than the original amount invested.  A group fixed annuity is an insurance contract designed for investing for retirement purposes.  The guarantee of the fixed account is based on the claims-paying ability of the issuing insurance company.  Although it is possible to have guaranteed income for life with a fixed annuity, there is no assurance that this income will keep up with inflation. Amounts distributed will be taxed as ordinary income in the year it is distributed.  An annuity does not provide any additional tax deferral benefit; tax deferral is provided by the plan.  Annuities may be subject to additional fees and expenses to which other tax-qualified funding vehicles may not be subject.  However, an annuity does offer other features and benefits, such as lifetime income payments and death benefits, which may be valuable to you.