What is a retirement plan?

A retirement plan is fundamentally a financial arrangement designed to provide income during retirement. It encompasses various savings vehicles and investment strategies tailored to accumulate funds that will be accessed after an individual stops working. These plans are crucial for ensuring financial stability in retirement, allowing individuals to maintain their desired standard of living once they are no longer earning a regular paycheck from employment.

While saving on taxes, budgeting monthly expenses, and investing in real estate can be part of overall financial health and strategy, they do not define a retirement plan. A retirement plan specifically focuses on the foresight of preparing for retirement by saving and investing money that will support someone financially during their later years. Thus, the essence of a retirement plan lies in its purpose of securing future income, which aligns perfectly with the definition provided in the correct choice.