Would it be best to put it in retirement accounts? From what I read they are so highly penalized if accessed before retirement age as to make it useless for anything but use after retirement age.
You're right about the early withdrawal penalties. But if your parents don't need to access their money until retirement age then yes, putting it into retirement accounts will probably be worthwhile. Their contributions to such accounts (up to an income-dependent ceiling) are tax deductible. The Dutch income tax brackets are 36.55%, 40.8% and 52%, so that could be a big savings right there. Retirement accounts are also exempt from the annual asset tax of 0.86%, 1.38% or 1.62%, which adds up too over the years. The downsides are very strict rules that may be subject to unexpected change. And at retirement age the money in retirement accounts has to be used to purchase an annuity, which again may not be ideal.
Are taxed savings vehicles worthwhile even with the extra taxes?
Yes, because the tax-advantaged retirement accounts are inflexible and it's impossible to put all your money into them anyway.
Is buying rentals maybe more worthwhile?
It could be, but your parents should be aware that this will probably cost them more time and effort and expose them to more concentration risk than if they were to open an investment account with a bank or broker and invest in the stock and bond markets. They should also be aware that the tax treatment of rentals depends on the amount of time the landlord puts into them, with more time generally resulting in unfavourable tax treatment: rental income taxed at 36.55%, 40.8% or 52% depending on their marginal tax bracket.