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. Bank Deposits

    Money placed into a banking institution for safekeeping. Bank ...
  2. Money Market Account

    An interest-bearing account that typically pays a higher interest ...
  3. Savings Account

    A deposit account held at a bank or other financial institution ...
  4. Deposit Interest Rate

    The interest rate paid by financial institutions to deposit account ...
  5. IRA Adoption Agreement And Plan ...

    A contract between the owner of an individual retirement account ...
  6. Account History

    All activity within an account, usually since inception. In a ...
Related Articles
  1. Retirement

    Introduction To Retirement Money Market Accounts

    Money market funds are used in retirement plans and accounts because they are liquid, stable and pay competitive rates of interest.
  2. Investing

    The Best Investment Accounts for Young Investors

    What are the best investment accounts for young investors? A few types to consider.
  3. Financial Advisor

    Top Tips for Retirement Account Withdrawals

    Top things you need to know when it comes to managing the complex task of retirement account withdrawals.
  4. Investing

    Money Market Accounts vs. Savings Accounts

    An interest-bearing account that pays a higher interest rate than a savings account and gives the account holder limited check-writing ability.
  5. Personal Finance

    4 Savings Accounts for Investors

    Curious about the best saving accounts and which ones suit investors?
  6. Retirement

    The Hidden Costs of Too Many Retirement Accounts

    Having multiple retirement accounts can increase the cost of managing and preparing for retirement.
  7. Personal Finance

    Handling High-Yield Savings Accounts

    Is this the savings route for you? Read on to find out what these accounts have to offer.
  8. Retirement

    Don't Spend Your Retirement-Fund Cash This Way

    Before you cash out or raid one of your retirement funds, consider the following things you should not do with that money.
RELATED FAQS
  1. Why would you keep funds in a money market account and not a savings account?

    Read about the differences between money market accounts and savings accounts, and see why a depositor would elect a money ... Read Answer >>
Hot Definitions
  1. Asset Turnover Ratio

    The amount of sales generated for every dollar's worth of assets in a year, calculated by dividing sales by assets.
  2. Book Value

    1. The value at which an asset is carried on a balance sheet. To calculate, take the cost of an asset minus the accumulated ...
  3. Dividend Yield

    A financial ratio that shows how much a company pays out in dividends each year relative to its share price.
  4. Fixed-Income Security

    An investment that provides a return in the form of fixed periodic payments and the eventual return of principal at maturity. ...
  5. Free Cash Flow - FCF

    A measure of financial performance calculated as operating cash flow minus capital expenditures. Free cash flow (FCF) represents ...
  6. Leverage Ratio

    Any ratio used to calculate the financial leverage of a company to get an idea of the company's methods of financing or to ...
Trading Center