The Most Underused Account in Retirement Planning:

Every year I sit down with clients and ask some version of the same question: what do you want your money to do for you in 15 or 20 years? Almost nobody has a confident answer. Life changes. Priorities change. What matters to you today isn't necessarily what's going to matter two decades from now.

The one thing nearly everyone agrees on, though, is that they want options. They don't want to feel locked in. And when I look at how most people actually save, that's exactly the problem — they're locked in without realizing it.

One Bucket Isn't a Plan

Most of the people I work with have almost everything sitting in a single tax bucket. A 401(k). A pension if you're a teacher or government employee. These are good tools. I'm not here to talk anyone out of using them. But when that's the only place your money lives, you've agreed to one set of rules — access at 59 1/2, taxed as ordinary income on the way out — whether that still fits your life or not.

What I rarely see enough of is a real, funded nonqualified account. A brokerage account. Individual stocks. Money that isn't wrapped in a retirement wrapper at all.

Why It Matters Before Retirement

A nonqualified account is just an investment account you fund with after-tax dollars — no contribution limits, no early withdrawal penalty, no rules about when you're allowed to use it. That sounds simple, but it's the difference between having options and not having them.

Say you want to buy an investment property. Buy into a practice. Buy out a business partner. Help a kid with a down payment. If those dollars are sitting in an IRA or 401(k), you're paying taxes and possibly penalties just to get to them, on top of whatever the transaction itself costs you. If they're in a brokerage account, you access them on your terms.

This is the piece most retirement plans are missing — not because tax-deferred accounts are bad, but because nobody's balancing them with something that stays flexible in the years before 59 1/2.

Why It Matters After You're Gone

The difference doesn't stop at retirement. It carries into what you leave behind.

Nonqualified accounts get a step-up in cost basis at death. Your heirs inherit them at current market value, and if they sell right away, there's little to no capital gains tax owed.

Retirement accounts don't get that treatment. Since the SECURE Act, most non-spouse beneficiaries are stuck with the 10-year rule — the entire account has to be distributed, and taxed as income, within 10 years of inheriting it. For a lot of families, that means a much bigger tax bill landing at the worst possible time, often stacked on top of their own income in their highest-earning years.

The Real Question

I'm not telling anyone to stop contributing to their 401(k) or to walk away from a pension. I'm saying that if every dollar you own falls under the same set of rules, you don't actually have a plan — you have a guess dressed up as one.

The clients who feel the most in control aren't the ones with the biggest account balances. They're the ones who built in flexibility on purpose — tax-deferred, tax-free, and taxable all working together, so that whatever they decide they want in 10 or 20 years, they have a way to get there.

If most of your savings are sitting in one bucket, that's worth a second look.