What Is a Retirement Fund?


Quick Answer

A retirement fund is a deposit account that is funded by an individual's retirement and disability contributions. This account is then used to pay out annuities when the account owner has retired. Most employed individuals contribute to their retirement fund by having money deducted from each paycheck.

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What Is a Retirement Fund?
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Full Answer

Many companies offer workers the option of starting a retirement fund. Individuals may also establish their own retirement fund through a financial organization. There are many different types of retirement plans such as Individual Retirement Arrangements (IRAs), Roth IRAs, 401(k), Simplified Employee Pension and Employee Stock ownership plans.

The Internal Revenue Service advises those wishing to set up a retirement fund to seek out the assistance of a trusted tax professional or financial advisor. Though the IRS generally limits the amount that an employee may contribute to his retirement plan in a given year, these limitations may increase with age. Some retirement funding options allow employers to contribute a preset dollar amount or a percentage of an employee's pay to his retirement account, while other retirement funds require that the employer match the employee's contributions to his individual retirement fund. There are also retirement fund options that do not require employers to contribute to their employees' retirement fund at all.

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