We review recent progress and motivate the need for further developments in nuclear optical potentials that are widely used in the theoretical analysis of nucleon elastic scattering and reaction cross sections. In regions of the nuclear chart away from stability, which represent a frontier in nuclear science over the coming decade and which will be probed at new rare-isotope beam facilities worldwide, there is a targeted need to quantify and reduce theoretical reaction model uncertainties, especially with respect to nuclear optical potentials. We first describe the primary physics motivations for an improved description of nuclear reactions involving short-lived isotopes, focusing on its benefits for fundamental science discoveries and 
applications to medicine, energy, and security. We then outline the various methods in use today to build optical potentials starting from phenomenological, microscopic, and ab initio methods, highlighting in particular the strengths and weaknesses of each approach. We then discuss publicly-available tools and resources facilitating the propagation of recent progresses in the field to practitioners. Finally, we provide a set of open challenges and recommendations for the field to advance the fundamental science goals of nuclear reaction studies in the rare-isotope beam era.