Retirement Money Market Account

DEFINITION of 'Retirement Money Market Account'

A money market account that an individual holds within a retirement account such as an IRA. In a retirement money market account, deposits are placed in low-risk investments like certificates of deposit, Treasury bills and short-term commercial paper. The account pays a relatively low rate of interest, slightly higher than a savings account, but provides liquidity and stability. For the account holder, it operates much like a checking or savings account.

BREAKING DOWN 'Retirement Money Market Account'


A retirement money market account may be held within a Roth IRA, traditional IRA, rollover IRA, 401(k) or other retirement account. Unlike a regular money market account, a retirement money market account is governed by a retirement plan agreement. For example, the account holder may not be able to withdraw money from the account without paying a penalty until he or she has reached a minimum age, such as 59.5. As a benefit, however, the account balance may be allowed to grow tax free.
 
A retirement money market account is a conservative investment that may be used as part of a diversification strategy within an overall retirement portfolio. Its value will remain stable regardless of what the stock or bond markets are doing. And unlike stocks and bonds, money market account balances held at a bank are FDIC insured up to $250,000 per depositor, per institution.
 
A retirement money market account may also be used to store the proceeds of stock and bond sales as the account holder gets older and seeks more conservative holdings. In addition, money market accounts often have check-writing privileges, making it easy for retirees to withdraw retirement account funds as needed.
 
While these accounts may pay a higher rate of interest than a generic savings account, a major drawback of retirement money market accounts is that they may not earn enough interest to outpace inflation, meaning that the account holder’s balance is effectively shrinking each year in terms of its purchasing power
RELATED TERMS
  1. Money Market Account

    An interest-bearing account that typically pays a higher interest ...
  2. Money Market

    A segment of the financial market in which financial instruments ...
  3. 401(k) Plan

    A qualified plan established by employers to which eligible employees ...
  4. Extended IRA

    An IRA that allows a second generation beneficiary to continue ...
  5. Traditional IRA

    An individual retirement account (IRA) that allows individuals ...
  6. Individual Retirement Account - ...

    An investing tool used by individuals to earn and earmark funds ...
Related Articles
  1. Retirement

    Roth vs. Traditional IRA: Which Is Right For You?

    To answer this question, you need to consider several of the factors we outline here.
  2. Taxes

    After-Tax Balance Rules For Retirement Accounts

    Accumulating post-tax assets can work to your advantage. Find out how.
  3. Taxes

    3 Retirement Account Rules To Know

    Stay up-to-date on regulation amendments to avoid penalties as well as take advantage of new opportunities.
  4. Taxes

    The Basics Of A 401(k) Retirement Plan

    This plan has become one of the most popular retirement options. Find out why.
  5. Taxes

    Exceptions To The 60-Day Retirement Account Rollover Rule

    A non-qualified distribution might still be tax and/or penalty free under certain conditions.
  6. Retirement

    Not All Retirement Accounts Should Be Tax-Deferred

    It may be better to leave your assets exposed to the tax man when you're saving to retire.
  7. Retirement

    Deadlines You Must Meet If You Inherit A Retirement Account

    If you've inherited an IRA or any other retirement account, we tell you what deadlines you need to be aware of.
  8. Savings

    High-Risk Retirement Portfolio Not Always Taboo

    Find out how much risk your portfolio can take and whether your money will last.
  9. Mutual Funds & ETFs

    Bear-Proof Your Retirement Portfolio

    Find out how to protect your assets so you can live out your dreams in style.
  10. Options & Futures

    The Rap On Wrap Fees For Retirement Accounts

    If your retirement account is managed under a wrap fee program, you need to consider whether you should pay the fee out of your retirement account balance or out-of-pocket.
RELATED FAQS
  1. Am I losing the right to collect spousal Social Security benefits before I collect ...

    The short answer is yes, if you haven't reached age 62 by December 31, 2015. The Bipartisan Budget Act of 2015 disrupted ... Read Full Answer >>
  2. What's the difference between Social Security Disability Insurance (SSDI) and Supplemental ...

    Disabled persons can receive payments through two programs: Social Security Disability Insurance and Supplemental Security ... Read Full Answer >>
  3. Where else can I save for retirement after I max out my Roth IRA?

    With uncertainty about the sustainability of Social Security benefits for future retirees, a lot of responsibility for saving ... Read Full Answer >>
  4. When can catch-up contributions start?

    Most qualified retirement plans such as 401(k), 403(b) and SIMPLE 401(k) plans, as well as individual retirement accounts ... Read Full Answer >>
  5. Are 401(k) contributions tax deductible?

    All contributions to qualified retirement plans such as 401(k)s reduce taxable income, which lowers the total taxes owed. ... Read Full Answer >>
  6. Are 401(k) rollovers taxable?

    401(k) rollovers are generally not taxable as long as the money goes into another qualifying plan, an individual retirement ... Read Full Answer >>
Hot Definitions
  1. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  2. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  3. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  4. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  5. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  6. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
Trading Center