The 1 Account You May Be Overlooking for Your Retirement

There's a reason IRAs and 401(k)s are popular choices for building retirement savings. Retirement accounts like these give you a tax break on your contributions. They also allow your money to grow on a tax-deferred basis so you're not hit with a tax bill on capital gains year after year.

But there's a problem with traditional IRAs and 401(k)s. If you tap your savings before turning 59 and 1/2, you risk a 10% penalty on whatever sum you withdraw.

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Now you may think to yourself, "Well fine then. I'll just wait until 59 and 1/2 and pledge not to touch my savings beforehand."

Unfortunately, life might get in that way of that plan.

If you're laid off at age 57 and can't find another full-time job, your IRA may be off-limits for another two years. If health issues force you to stop working at 54, you may need to start tapping your retirement savings a lot sooner than expected. So you clearly need a backup plan.

A taxable brokerage account is worth considering

With a taxable brokerage account, your money won't go in tax-free and you'll have to pay taxes on capital gains each year. On the plus side, you get the flexibility to tap your savings at any time.

Of course, if you're forced to retire much sooner than planned, you may need to find a way to work part-time or freelance if you don't have enough savings to tide yourself over for those extra years. But where a taxable brokerage account really comes in handy is when you have a lot of money saved and can afford to start raiding your nest egg well ahead of age 59 and 1/2.

If you're 52 and your savings hit the $4 million mark, for example, you may feel comfortable retiring. And if your industry is changing in a negative way and your work is no longer rewarding, that's an option you may want to exercise.

If you have a large portion of your savings in a taxable brokerage account, you have more options. So it pays to use one of these accounts to house part of your nest egg, even though there's no special tax treatment on that money.

Don't sweat the tax consequences

You may be worried about yearly tax bills on capital gains if you house some of your long-term savings in a taxable brokerage account. But know that you have options.

You may be able to help offset those gains through strategic tax deductions. There's also tax loss harvesting, where you intentionally sell assets at a loss to help offset gains. Working with a tax professional could help you make the most of a regular brokerage account when you're using it as part of your retirement savings strategy.

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