Though many people don't associate money market deposit accounts (MMDA) with retirement planning, these accounts are useful for the temporary holding of funds for one's retired years. Once you have the minimum amount required to open one (they vary according to the financial institution), you can use an MMDA for any of several retirement uses.

You can use them to transition to a mutual fund or stock retirement account once you have built up a fairly large amount of money, perhaps $2,500 or $5,000. People do this with the expectation of earning higher returns elsewhere, though returns are never guaranteed. During this time, their money will grow at a rate competitive with those of certificates of deposit. With money market individual retirement accounts (IRAs), this money can grow tax-deferred until it is rolled over to a different investment.

A few very conservative savers prefer to use an MMDA as a long-term retirement account. Sacrificing the higher anticipated return of many other investments for safety of principal, they keep their money in an MMDA for the duration of their working years and draw from it in retirement. Because retirement MMDAs are insured for up to $250,000, they are attractive to some as a low-volatility vehicle for building funds over many years.

Many retirees look for a convenient place to keep some or all of the money that they must withdraw from their tax-qualified 401(k)s, IRAs, Keogh plans, and other such retirement accounts. An MMDA is a popular place for many to store their newly withdrawn funds because of its liquidity and insurance features. Accountholders can withdraw funds without having to pay fees (unless they exceed the allowed monthly withdrawal limit). However, the insurance coverage would drop to $100,000 because it would no longer be a retirement account.