In financial planning I get to see my fair share of ugly. The millennial dealing with piles of credit card debt and barely making the minimum payments, because she has never seen a budget. A divorcee whose husband always handled the finances and now she is seeking financial confidence. A retiree that has to go back to work part time because he never created a financial plan and retired too early. All of these examples fuel my passion for constructing a path for you to retire worry-free and enjoy the best version of your life.

To bring to you today’s solution, I introduce the brokerage account. Individual brokerage, taxable brokerage – They all mean the same thing. For those who aren’t familiar with the term, a brokerage account is one that gives you the flexibility of investing your hard-earned, after-tax dollars into an investment account.

The beauty of having a brokerage account, is that you are providing additional savings for yourself and earning more, overtime, than you would in a Certificate of Deposit (becoming outdated in my opinion), or in your bank’s savings account. The funds you deposit are accessible prior to age 59½ and there are no taxes paid on the distribution or any early withdrawal penalties to fuss over. Taxes are paid each year on the growth – and guess what? You can use the gain to pay the tax!

If you are someone who is maxing out your 401k at work, maxing out your Roth IRA, and is still struggling to decide what to do with the remaining income (there is no limit by the way!), then diversify your account types and consider owning a brokerage account. And I don’t mean to “diversify” into several asset classes.

(Read this article on why asset class diversification isn’t all it is cracked up to be: http://libertaswealth.com/diversification-really-work/).

What I mean by diversifying your account types is this: Position yourself for retirement by having pre-tax qualified accounts (such as a Traditional IRA), after-tax qualified accounts (Roth IRAs), and after-tax non-qualified accounts (Cue: Brokerage Account). This way, as your situation changes and your tax brackets change, you are prepared for whatever curve-ball life throws your way. In the beginning of retirement, every day is like Saturday. Spending usually increases, so it is important to know how you can access your money and doing so in a manner that yields the least amount of tax implications.

Let’s say you’re still working and retirement is still a ways off. While it is the most common bucket list item that we plan for with our financial plans, there are still some other goals that are of importance. Maybe it’s a home-remodel, new car, wedding, tuition, medical bills, etc. These are often larger expenses that you wouldn’t want to tap into your qualified, RETIREMENT, accounts for. Rather, having something that is more liquid to pull from, is invested and working for you, and won’t create a tax or penalty headache. Now that’s a beautiful thing.