“Contribute enough to your 401(k) to get the full match.”

“Open an IRA.”

We’ve all heard these standard snippets of advice. However, while investing in your retirement is important, it’s not the only way to invest; a taxable account is another smart option.

Taxable accounts don’t have the same benefits as IRAs and 401(k)s, which enjoy tax-deferred growth. But they do offer flexibility and other perks. Below, find out how taxable accounts work and what their advantages are.

5 times a taxable account could be beneficial

An individual taxable account is an investment account offered by a brokerage. With a taxable account, you can invest in assets like stocks, bonds and mutual funds. As your fund grows in value based on the stock market’s performance, you’ll owe taxes each year on your investment income.

While retirement accounts like 401(k)s and IRAs have tax benefits, they often have limitations too. Taxable accounts offer greater flexibility and control over your money. Here are five situations where investing in an individual taxable account may make sense.

1. You plan to use the money before you retire

When you invest in a retirement account, accessing your money before retirement age can cost you. For example, if you have a 401(k) and make a withdrawal before age 59 and a half, the penalties can be costly. Not only will you owe federal and state income tax, but you’ll also pay a 10% early withdrawal penalty. That means if you need access to your money before you retire, you’ll lose a big chunk of it thanks to taxes and penalties.

With an individual taxable account, however, you’re not subject to the same rules. A taxable investment account can be cashed out at any time and for any reason without penalty. If you plan to save money for a major goal besides retirement, a taxable account may make more sense than a retirement account.

2. You want to use the money for various goals

There are many tax-advantaged investment accounts that can be used for a variety of purposes. However, how you use the money in those accounts typically is limited to the account’s specified intention. For example, 529 plans can be advantageous for college savings, but you can withdraw from a 529 plan only to pay for qualified education expenses — or face a 10% penalty on the withdrawals plus income taxes.

Unlike 529 plans and other tax-advantaged investment accounts, you can use a taxable account for anything. If you’re planning to buy a home, start a business, splurge on an epic vacation or simply invest money for a rainy day, you can use an individual taxable account as your savings vehicle and withdrawal money from it penalty-free.

3. You have a lot of money to invest

If you want to save aggressively for a particular goal, you may find tax-advantaged investment accounts restrictive. That’s because most have set contribution limits For example, as of 2019, you can contribute only up to $6,000 a year to a traditional or Roth IRA ($7,000 if you’re age 50 or older). That limit may not be enough if you want to aggressively save for your future goals.

While some taxable accounts may require a minimum starting contribution, they don’t limit how much you can invest. When you’re saving for a big purchase or expense, that freedom can be a huge advantage.

4. You earn too much for specialized investment accounts

Some tax-advantaged accounts have income limits. If you earn over the limit, you cannot contribute to that type of account. For example, if you want to open a Roth IRA, you can contribute the maximum amount as long as your income is under $122,000 if you’re single (or under $193,000 for couples who are married filing jointly). After that number, your contribution amount is phased out.

There are no income limits for individual taxable accounts, so you don’t have to worry about income restrictions and can invest your money as you wish.

5. You don’t want to worry about minimum distributions

With some retirement accounts, you’re required to take minimum distributions each year. Per IRS regulations, you have to withdraw money from a traditional 401(k) or IRA once you reach age 70 and a half. How much you have to withdraw depends on your age, year-end account balance and withdrawal factor.

For example, let’s say you had $500,000 in a traditional IRA and were 71 years old. You would have to withdraw roughly $18,870 this year to meet the required minimum distribution, even if you don’t need the money.

Individual taxable accounts don’t have required minimum distributions. You have complete control over when you start taking out money and how much you withdraw.

Opening a taxable investment account

If you’re looking for a way to invest that offers more flexibility and control than 401(k)s, IRAs or 529 plans, a taxable account may be best for you. It allows you to contribute as much as you want for whatever you want and to withdraw money on your own schedule.

If you decide that individual taxable accounts are right for you, you can open a brokerage account. For more information on how to get started, learn how brokerage accounts work.