The Top Investment Strategies For Your Retirement

Key Takeaways

Everyone should know by now that you need to prepare for retirement. But what people don’t always know is how to go about planning for retirement, and what the best retirement investment strategies might be. Whether you’re just starting out in your 20s or reaching the pinnacle of your career, you should start investing for retirement right away. In this article, we’ll walk you through the top strategies for retirement planning. Then, we’ll reveal the top tips on how to invest your retirement savings. You’ll learn not just how to save for retirement, but then put those savings to work so that they grow while you sleep.

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Top 10 Investment Strategies For Retirement Planning

Later in this article, we’ll discuss how exactly you can put your retirement savings to work. Before we can even get to that discussion, you’ll first need to master the basics of saving for retirement. This includes different types of savings accounts, benefits to take advantage of, and what to avoid. Here are the most recommended retirement investment options:

  1. Contribute To Your 401K

  2. Consider yourself lucky if you have an employer who sponsors a 401(k) plan. Consider yourself even more lucky if they offer 401(k) matching. According to Investopedia, a 401(k) is a tax-advantaged retirement account sponsored by employers. As the employee, you make contributions through automatic payroll deduction. This has the added benefit of lowering your taxable income.

    Do your best to contribute as much of your paycheck as you can, especially if there is a minimum to qualify for employer matching. The IRS states that the contribution limit in 2020 is $19,500. Employees over the age of 50 are allowed to make additional catch-up contributions of $6,500. One thing to be careful of is to ensure you don’t touch these accounts until you reach retirement age. Otherwise, you will be heavily taxed if you make a premature withdrawal.

  3. Open An IRA Or A Roth IRA

  4. If your employer doesn’t offer a 401(k), then don’t worry, there are other options. An IRA, or an individual retirement account, holds similar benefits to a 401(k). It offers tax-deductible contributions and tax-free growth. The only real downside is that you have to open up and maintain the IRA yourself through a private financial entity, like a bank or brokerage.

    If you’re concerned about making tax-free withdrawals during retirement, then consider a Roth IRA. The Roth IRA differs from a traditional IRA in that you make after-tax contributions. Once you’ve made your contributions, your money actually grows tax-free. With a traditional IRA, your earnings don’t get taxed while you hold the account, but you will get taxed later on when you’re making withdrawals. Both options offer advantages and disadvantages, with neither being superior. It’s a matter of selecting the option that best fits your retirement goals.

  5. Open A Health Savings Account

  6. The harsh reality is that your health expenses likely will increase significantly in your golden years. In fact, Fidelity Investments estimates that a couple in their mid-60’s retiring today could pay $285,000 in healthcare and medical expenses during retirement. Keeping this large sum in mind, preparing as early as possible is necessary.

    Health Savings Accounts (HSAs) are a great way to start preparing ahead of time. These accounts are similar to 401(k)s but are intended to pay for healthcare expenses. Contributions are tax-deductible, any growth is tax-free, and withdrawals are tax-free if they are spent on qualifying healthcare expenses.

  7. Be Aware Of Retirement Fund Fees

  8. When researching what type of retirement investment strategy you’d like to follow, be sure to double-check the fine print and find out what fees you’ll be charged. For example, mutual funds charge portfolio-management fees.

    Do your research and identify options that charge the lowest fees possible. If fees are unavoidable, then make sure your money is going toward a product of value. You don’t want these fees to add up and start eating away at your bottom line.

  9. Buy A Fixed Annuity

  10. The idea of outliving your savings during retirement is a scary concept. Another scary scenario to think about is your retirement investments performing poorly. What you can do to hedge and protect yourself against these outcomes is to invest in an annuity. A fixed annuity is an insurance product that will provide you with a set income for a certain amount of time. The timeline of when you begin to receive benefits, and for how long, are dependent on what type of fixed annuity you buy.

  11. Utilize Saver’s Credit

  12. If some type of tax credit is available to you, then always take advantage of it. Based on your adjusted gross income (AGI), your IRA or 401(k) contributions can get you qualified for a tax credit. These are credits that can help you save significantly in your income taxes each year. You can receive up to $1,000 if you are filing alone, and $2,000 if you are married and filing jointly. The credits you receive are based on your personal contributions, so it’s an incentive to start putting more towards your retirement plan.

  13. Delay Social Security Benefit Collection

  14. Some savvy retirees will delay their collection of social security benefits. The full retirement age (FRA) under the social security plan is currently 66. Did you know that the longer you wait, the more you can collect? For example, a retiree who waited until the age of 70 could potentially increase their annual payments by 8 percent.

    Another tip is to be strategic with your partner if you’re married. If you have a substantial difference in income, it would be wise to wait to start collecting. This way, you can collect the benefits under the higher earner in the couple.

  15. Prepare For Inflation

  16. It’s great if you are tucking savings away for retirement and letting those savings grow. However, have you stopped and thought about whether that growth will be enough to beat out inflation? On average, the inflation rate has been roughly 3 percent. That means that any amount of money today will be that much less valuable in the future.

    Whatever you’ve calculated as your retirement savings goal will be less valuable in the future because of inflation. In other words, it might not be enough. Whatever investment retirement strategy you put together might be, be sure to account for inflation.

  17. Assess Risk Tolerance

  18. When considering different retirement investment strategies, make sure to take your risk tolerance into account. Some types of investments might offer higher returns but are often associated with higher levels of risk. Not all investments are created equal, so you’ll want to make sure that you feel comfortable with the portfolio you create.

    Be sure to check out this article on different long-term investment strategies, where we discuss many different strategies with an assessment of risk levels for each.

  19. Create A Withdrawal Strategy

You’ve saved up a nest egg for retirement – great! However, have you thought about how much, and how often, you’ll be withdrawing from your retirement accounts? Will you be slammed with penalties with each withdrawal?

A withdrawal strategy is an important but often forgotten aspect of saving for retirement. Although it might be a problem for tomorrow, you may regret not considering this aspect. When you’re actually retired and depending on your retirement income and nothing else, fees, taxes, and penalties could sting that much more.

Experts recommend creating your withdrawal strategy at least 5 years before you retire. This is something you should definitely address with a financial advisor.

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The 10 Best Strategies For Investing Your Retirement Savings

Perhaps the biggest drive for investors is the idea of achieving financial freedom, especially in retirement. If you have any savings, it would be foolish not to put your money to work so that it grows while you sleep.

If you’re late in getting started with saving for retirement, then investing is even more critical. By investing wisely, you have a good chance of making up for lost time. However, you’ll want to be careful not to jeopardize your money by being too bullish. Investing involves a juggling act between risk and return. Here are the top 10 retirement investing strategies to help you balance between the two:

  1. Create A Total Return Portfolio

  2. Utilize Retirement Income Funds

  3. Use Immediate Annuities

  4. Utilize Variable Annuities

  5. Purchase Bonds

  6. Invest In Rental Real Estate

  7. Keep Safe Alternatives

  8. Closed-End Funds

  9. Dividends

Create A Total Return Portfolio

A total return portfolio focuses on providing the best possible mix of investments to mitigate risk. This is in comparison to a cash flow portfolio, which focuses on getting you the highest possible returns. Remember: the higher the returns, then the higher the level of risk you’ll likely have on your hands.

A total return portfolio offers a predetermined withdrawal rate, around 5 to 7 percent per year. The goal is to obtain an average annual return that will be equal to, or greater than, your withdrawal rate. Keep in mind that the annual return is an average over a 10- to 20-year span. You will experience some fluctuations subject to market conditions. However, this investment approach is a sturdy way to protect yourself against risk and ensure stability in the long-run.

Utilize Retirement Income Funds

Retirement income funds are like mutual funds, where your money is invested automatically across a mix of bonds and stocks. (This is not dissimilar to how a robo-advisor works.) The main goal here is to produce income, to be distributed to you monthly.

If you have a higher monthly income in retirement, the fund may use some of your invested principal to meet your payout target. Other fund types might pay out a lower sum to help preserve the principal amount you invested. A major benefit of a retirement income fund is that you retain full control and can access your principal investment if needed. (Although you’ll want to avoid doing so unless you are withdrawing your money to re-invest the funds into a better option.)

Use Immediate Annuities

Want guaranteed income for life? If you dislike uncertainty and want to guarantee your retirement income, then an immediate annuity may be a good fit.

These are like purchasing an insurance policy: for a lump-sum payment, you’re guaranteed to receive a set income for a predetermined time frame. This is a great option to familiarize yourself with, especially if you have little to no sources of guaranteed retirement income.

Utilize Variable Annuities

Although they may have similar names, immediate and variable annuities couldn’t be any more different. While immediate annuities are like purchasing insurance, in the case of a variable annuity, your money goes into an investment portfolio. In this case, your investment rides the gains and losses of that portfolio.

Variable annuities allow investors to add riders for an additional price. These are guarantees or protection plans that can help cover you in a variety of scenarios. Riders come in many shapes and forms, but in short, they protect you to make sure you still get an income for life. This is a smart protection to put in place should anything happen to your investment portfolio.

Purchase Bonds

Bonds may very well be one of the safest retirement investment strategies available on the market. A bond represents a loan (an IOU if you will) from the government, a corporation, or a municipality. In this case, the borrower guarantees interest payments for the duration of time your money is loaned to them. Once the bond reaches its term, you receive back the principal, plus the amount of interest you’ve gained throughout.

This is a great way to secure a steady income stream in retirement. In addition, bonds typically have high-quality ratings, which can provide you with peace of mind. They also offer flexible options, such as choosing between bonds that have short or long terms or offer higher or lower interest payments.

Although you can’t expect to receive high returns from bonds, you can do your research and find bonds that are worth your while. Some bonds might adjust based on inflation, while others might pay a solid amount of interest income.

Invest In Rental Real Estate

Investing in rental real estate is the gold standard in retirement planning. If you are in a position to buy real estate, then act now. Not only will you secure yourself a passive income stream, but you’ll also have access to real property that will appreciate in value over time.

Depending on your local rental market, your rental income can be used to pay off your mortgage. Even better, some landlords manage to pocket leftover funds that can be put toward retirement savings or your next real estate purchase.

Eventually, a property can be refinanced to re-invest into a second rental property, and so on. You also have the flexible option to rent out a property with the plan to make it your retirement home. If you already have a home you want to retire in, then you can rent it out indefinitely as your source of retirement income. In either case, your housing in retirement is taken care of. If you’re interested, find out how to get your rental property business up and running here.

Keep Safe Alternatives

Retirement investments involve some level of risk, so you’ll always want to have a backup plan. The goal of a safe alternative is to pad yourself with a safety net should you fall. Experts recommend that you build up an emergency account without the focus of generating more income.

Another great use for your emergency account is to use it as your parking lot, or your think tank. Any smart investment plan takes time and thoughtfulness, and the execution shouldn’t be rushed. If you have some investment capital ready but aren’t ready to launch your investment strategy yet, then park your money into your emergency account. That way, you can let your money grow even the slightest amount while you wait.

Closed-End Funds

Closed-end funds are a type of investment fund that produces income on a monthly or quarterly basis. This income can come in the form of interest, dividends, or a return of the principal. These funds have different modalities, such as stocks or bonds. Other types might use leverage, by borrowing against existing securities. However, be careful. The word “leverage” always clues you into additional risk. These funds can produce a higher yield but can be volatile. Be sure to do your research before investing in closed-end funds.


If you aren’t a savvy investor or don’t want to bother doing your own homework, dividend funds can be a great option. You can get the benefits of being a stock investor without having to do research or select your own stocks.

Dividend funds are stock portfolios that are owned and managed on your behalf. You get to earn the dividends, but you’ll be charged a fee in exchange for this service. Keep in mind that dividend funds have the same benefits and pitfalls of stock investing. Your winnings or losses will rise and fall right along with the market.

Real Estate Investment Trusts (REITs)

Until now, we’ve discussed portfolio investing, as well as investing in real estate. What if you could create a trifecta of all three concepts? (Investing, portfolios, and real estate.)

Well, it turns out that such a concept already exists, and it’s alive and well. Real Estate Investment Trusts (REITs) operate similarly to mutual funds, except the asset in question is real estate. REIT companies purchase, manage, and rent out real estate on behalf of their investors. This is an excellent way to acquire a diversified portfolio and get into the real estate investing game at the same time. If you have a certain type of real estate you’re interested in, you can find REITs that specialize in that specific sector (residential, commercial, industrial, etc.) Read more on the specifics of REIT investing, and how to get started, here.


Choosing the best retirement investment strategies might feel like a daunting task, and rightfully so. It’s a lot of pressure to plan for the unknown and to find out how you’ll end up with exactly how much money you’ll need to live out your golden years. The best retirement investing advice we can provide is to break things down step by step and even work backward a little. Start by calculating how long you expect to be retired for, and exactly how much money you’d need annually to live comfortably. A financial advisor would be the perfect advocate to help you get started and identify the best options to help meet your goals.

Do you have any unique retirement investment strategies you’d care to share? Share in the comments below!

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