Which investment vehicle is typically used for retirement savings?

Individual Retirement Accounts (IRAs) are specifically designed to facilitate retirement savings, offering tax advantages that encourage individuals to save for their future needs. Contributions made to traditional IRAs can often be tax-deductible, and any earnings in the account grow tax-deferred until distributions are taken, typically during retirement when individuals may be in a lower tax bracket. Roth IRAs allow for tax-free withdrawals in retirement since contributions are made with after-tax dollars.

While savings accounts, certificates of deposit (CDs), and money market funds can also harbor liquidity and may serve as part of a broader investment strategy, they do not offer the same targeted tax benefits or structure specifically aimed at retirement savings as IRAs do. Savings accounts often have lower interest rates and don't provide tax advantages; CDs are typically used for short- to medium-term savings goals with fixed interest rates; and money market funds, though they can yield higher returns than traditional savings accounts, lack the retirement-specific benefits tied to IRAs. Thus, IRAs distinctly stand out as the investment vehicle tailored for retirement purposes, making them the preferred choice for retirement savings.