What is the primary purpose of a retirement account?

The primary purpose of a retirement account is to offer tax advantages for retirement savings. Retirement accounts, such as 401(k)s and IRAs (Individual Retirement Accounts), are specifically designed to encourage individuals to save for their future, particularly their retirement years. Contributions to these accounts often have tax benefits, such as tax deferrals or tax-free growth, allowing savings to accumulate more efficiently over time.

By providing these tax incentives, retirement accounts help individuals build a nest egg that can support them financially after they stop working. This focus on long-term savings for retirement is a key distinguishing feature of these accounts compared to other financial products that may prioritize immediate income or investment strategies.