What is a retirement savings account?

A retirement savings account is specifically designed to help individuals save for their retirement, often incorporating tax advantages to encourage long-term saving. This type of account is aimed at building a financial cushion for when individuals are no longer in the workforce. Unlike general savings accounts used for everyday expenses or emergency funds, retirement savings accounts often come with features such as tax-deferred growth or tax-free withdrawals in retirement, depending on the type of account (like a 401(k) or an IRA). This structured approach to saving is vital for ensuring financial stability during retirement years, as it incentivizes individuals to set aside funds specifically for that purpose.