Dear Reader,

I’m about to say something that goes against a lot of mainstream personal finance advice.

I don’t think everybody should max out their retirement accounts.

I know, I know.

You’ve probably heard the exact opposite for most of your adult life.

Max out your 401(k). Get the employer match. Take every tax advantage you can get. Start early, keep contributing, and let compounding do its thing.

And for a lot of people, that’s excellent advice.

Because retirement accounts are incredibly effective at one thing:

Forcing you to save.

The money comes out of your paycheck before you have a chance to spend it.

It gets invested automatically, and assuming you leave it alone, it can quietly compound for decades.

You barely notice it happening.

I think that same dynamic helps explain why so many Americans are convinced real estate is the best wealth-building tool on Earth.

Buy a house with a mortgage and every month you have to make the payment. Part of that payment gradually builds equity.

Even during periods when stocks may perform better, plenty of people still wind up building more wealth through their homes simply because the mortgage forced them to keep putting money in.

A retirement account can do something very similar.

For a lot of people, that structure is extremely useful.

But there’s another side to it that gets far less attention.

The Harder Your Money is to Spend, the Harder It Is to Use

That forced-saving mechanism comes with a trade-off: you’re giving up some degree of access to your own capital.

And that brings us to the value of liquidity.

Suppose two people each have a $500,000 net worth.

The first has almost all of it tied up in home equity and retirement accounts.

The second has a meaningful portion sitting in cash and a regular brokerage account.

On paper, they may look equally wealthy.

But the second person has something the first person doesn’t have nearly as much of:

Flexibility.

Accessible money can give you enough runway to change careers, survive a long stretch with lower income, take advantage of an investment opportunity, or fund something that could increase your earning power dramatically.

There’s a psychological benefit too.

Knowing you have $500,000 somewhere is comforting.

Knowing you could actually access enough of it to walk away from a bad situation tomorrow gives you a very different kind of freedom.

I learned that almost by accident.

When I was working as a stockbroker, I could have shoved a lot more money into retirement accounts.

I didn’t.

Now, this wasn’t some brilliant strategy I had planned years ahead.

But looking back, I’m extremely glad I did.

Because when I quit my job to start Heresy Financial, it took me roughly a year and a half before the business was making enough money to pay my bills.

That accessible money gave me runway.

If I had spent the previous few years dutifully locking every spare dollar into retirement accounts, it would have been much harder for me to stay afloat long enough for the business to work.

Sure, that money may have been less tax-efficient sitting outside a retirement account.

But having access to it allowed me to make what turned out to be a far more valuable investment:

An investment in myself.

Now, before you take that as an argument for keeping all your money liquid, there’s another side to this.

Freedom, Responsibility, and Discipline Go Hand in Hand

Most people want more freedom.

But freedom with your money is only useful if you’re disciplined enough not to squander it.

Keep an extra $30,000 accessible and use it to fund a business, get through a career transition, or pursue a genuinely attractive opportunity, and that liquidity could pay off enormously.

Spend it on a nicer car because the money was sitting there…

And locking it away probably would have been better for you.

That’s part of the beauty of retirement accounts and home equity.

They create friction between you and your money.

For someone prone to spending whatever is available, that friction can be enormously helpful.

But if you’re disciplined enough to leave accessible capital alone until you have a productive use for it, liquidity can give you options that a larger locked-up retirement balance can’t.

I have two friends who illustrate this perfectly.

One works a government job but has started around seven businesses on the side.

He lost a bunch of money early on after going too big on one idea, and that experience made him much more careful.

But he kept taking swings.

His most recent business cost him roughly $70,000 to launch.

By around month four, recurring customers were covering the monthly burn, and around month five he sold the business for roughly $120,000 to $130,000.

He’s also extremely frugal.

He doesn’t make money and immediately blow it on cars or expensive trips.

So when he asks me what he should do with his retirement accounts, I give him advice I would never give everybody:

I wouldn’t lock up much more than he needs to get his employer match.

He has demonstrated over and over again that he can use accessible capital productively.

Eventually, one of those businesses could become the thing that completely changes his financial life.

I have another friend whose situation is almost the exact opposite.

He has a stable career, rarely changes jobs, and has no real desire to start businesses.

For him, I want every spare dollar he can reasonably save working inside that retirement system.

Because that’s likely to be one of his primary wealth-building engines.

Same retirement accounts – completely different recommendations.

And that’s why I’ve always been hesitant to give blanket rules about retirement planning.

That said, there is one retirement vehicle I’ve become increasingly fond of because:

It Gives You An Attractive Compromise Between Long-Term Tax Advantages And Access To Your Money

Here’s a quick primer on retirement accounts and their tax advantages.

With a traditional 401(k), you generally get the tax benefit today.

Let’s say you make $100,000 and contribute $5,000.

Instead of paying income tax on the full $100,000, you may only be taxed on $95,000.

The trade-off comes later.

When you eventually withdraw that money in retirement, those taxable distributions are generally taxed as ordinary income.

A Roth works the other way around.

You don’t get the deduction upfront.

If you make $100,000 and put $5,000 into a Roth, you’re still paying tax on the full $100,000 today.

But once that money is inside the Roth, it can grow for decades…

And qualified withdrawals in retirement can come out tax-free.

That’s already a pretty attractive trade.

But there’s another feature of the Roth IRA that I especially like.

Your regular contributions remain far more accessible than most people realize.

So if you’ve contributed $50,000 over the years and the account has grown to $100,000…

You can generally withdraw that original $50,000 of contributions without income tax (since you already paid it upfront) or the usual 10% early-withdrawal penalty.

Now, the gains are subject to different rules.

But you haven’t completely locked away every dollar you put in.

And that’s where the Roth starts to give you some of the best of both worlds.

You get the potential for decades of tax-free growth…

While retaining access to the money you originally contributed.

Now, the thing about both traditional 401(k)s and Roth IRAs is that you eventually run into contribution limits.

As of 2026, you can generally contribute up to $7,500 per year to a Roth IRA…

And once you hit $168,000 as a single filer or $252,000 filing jointly, you can’t contribute directly to a Roth at all.

So, at first glance, you’re capped.

But there is a legal workaround.

Enter the Backdoor Roth

The way it works is pretty simple.

First, you make a nondeductible contribution to a traditional IRA.

In other words, you put the money in after tax and don’t claim a deduction for it.

Then you convert that contribution into a Roth IRA.

If you convert it quickly and you don’t already have other pre-tax money sitting in traditional, SEP, or SIMPLE IRAs, there may be little or no additional tax due on the conversion.

You would owe tax on any gains that occur before the conversion, though.

So that’s the regular Backdoor Roth (please see this guide from Vanguard on how to set it up).

But there’s another strategy I like even more – the Mega Backdoor Roth.

With a Mega Backdoor Roth, you can potentially get up to $72,000 a year into a 401(k) – far more than the standard $7,500 Roth IRA limit.

Here’s how.

Your normal employee 401(k) contribution is capped at $24,500.

But that’s only one part of the overall limit.

The total amount that can go into the account from all sources can reach $72,000 in 2026.

That total includes your regular employee contribution, anything your employer contributes, and – if your plan allows it – additional after-tax contributions.

So suppose you contribute $24,500 and your employer puts in another $7,500.

That gets you to $32,000.

If your plan allows it, you could then contribute another $40,000 after tax to fill the remaining space up to $72,000.

And here’s the key:

You then move those extra after-tax dollars into the Roth side of the account.

Once they’re there, they can potentially compound for decades, with qualified withdrawals later coming out tax-free.

That’s the Mega Backdoor Roth.

The catch is that your 401(k) has to allow both the extra after-tax contributions and the Roth conversion.

Not every plan does.

But if you own a business and control how your 401(k) is set up – or your employer happens to offer the right features – this can let you get dramatically more money into Roth status every year than a normal Roth IRA allows.

Some employees at larger companies can do it too. You just have to check whether your particular plan supports it (check out this guide from Schwab for more info)

Now let me show you why I recently went through the trouble of setting one up.

Assume you’re 35 years old and you manage to get the full $72,000 into the account each year for ten years through contributions permitted by your plan.

With a 10% annual return…

After ten years, the account would be sitting at roughly $1.26 million.

Now you’re 45. Suppose you stop contributing completely.

You leave that $1.26 million alone for another 20 years, earning that same hypothetical 10% annual return.

By age 65, you’re looking at roughly $8.5 million.

And you can now take most of those distributions completely tax free.

Again, 10% is an assumption for the example. Markets aren’t going to hand you exactly 10% every year, and there’s no guarantee you end up with that amount.

But it shows you what can happen when you manage to get a large amount of capital into Roth status early enough and give compounding decades to work.

So the point is…

The Right Strategy Depends on YOUR Unique Situation

Years ago, I’m glad I didn’t push every spare dollar into retirement accounts.

At that point in my life, liquidity was more valuable to me.

The money I kept accessible bought me enough time to quit my job, build Heresy Financial, and find out whether I could make the business work.

Today, my life looks very different.

I have a profitable business and substantially more capital. I don’t need every spare dollar sitting somewhere I can reach tomorrow.

So now I’m willing to trade away more liquidity in exchange for the long-term tax advantages of something like the Mega Backdoor Roth.

The strategy changed because my life changed.

And I think that’s the real takeaway.

The goal isn’t to cram as much money as possible into whatever account gives you the biggest tax break.

It’s to structure your money around the life you’re actually trying to build.