What is the Best Way to Invest Money for Retirement?

You know you need to take your future into your own hands and start setting aside money for retirement. But, with all the different types of investments for retirement, it can feel overwhelming to come up with a plan and execute it.

So – what is the best way to invest money for retirement?

This is one of the most common questions we see asked by those getting started with personal retirement planning. And unfortunately, the answer isn’t quite as simple as “traditional 401Ks” “Roth IRAs” or even “the stock market”. That’s because your unique situation will influence the ideal investment vehicle for your retirement plan.

Don’t stress – we’re here to help you navigate this uncertain, seemingly complex process. We’ll guide you through a few of the top choices along with their unique pros and cons. Then, we’ll even provide you with some tips to hit the ground running and make your dream retirement vision a reality – no matter what your goals may be.

With all that said, let’s start by addressing the elephant in the room: there is no universally “best” way to invest money for retirement. Here’s why…

First – There Isn’t a “Best” Way to Invest Money for Retirement

We know you came here hoping to gain an answer to your question: what is the best way to invest money for retirement? But as we’ve just mentioned, this is a loaded question with no “one-size-fits-all” answer. 

That’s because no two situations are exactly the same. Here are just a few of the factors affecting where you should invest your money:

1. How old are you right now?
2. When do you want to retire?
3. How much income are you comfortable investing per month?
4. Will you start with a lump sum investment to jumpstart your retirement account?
5. Are you self-employed – or do you have an employer that can match contributions?
6. What sort of retirement lifestyle do you want to live?
7. What’s your risk tolerance for investing? 

As you can see, there are a lot of factors that go into building a personalized retirement plan. Your answers to these questions will influence what retirement investment options make the most sense for you. And, we have a complete guide covering the best retirement investment strategies by age to help you come up with a closer evaluation of where you should invest your money.

With all that said, there are four ways you can invest money for retirement that stand out as the best choice. We’ll cover them for you below. 

So, What are the Best Ways to Invest Money for Retirement?

So – what is the best way to invest money for retirement? As we said, it’s not as simple as putting all your cash into a retirement account like a 401K or IRA and just cashing out once you turn 60. That may work for some people – particularly, those who got a head start and started investing early.

However, you may need to take a more aggressive approach to invest for retirement if you didn’t start early enough. And frankly, the best way to invest money for retirement is going to be a combination of these investment vehicles. We’ll talk more about that later. First, let’s discuss the 401k – one of the most common choices.

401Ks 

A 401k is the most common type of defined contribution plan. And, there’s a reason for that – tax advantages. Because you contribute pre-tax wages to your 401K, you can lower your taxable income in the meantime. And, these pre-tax wages will grow tax-free until the time you withdraw them.

Another appeal of this type of retirement investment is how simple and straightforward it is. You don’t need to constantly analyze the investment or make changes over time – although you’re certainly welcome to adjust your allocations as life happens. However, most people just set their monthly contribution and forget about it until retirement gets closer.

Perhaps the biggest advantage though, for those who have the option, is employer matching. Most workplaces these days will offer a partial match on your contributions to your 401K – allowing you to get to your retirement goals faster. It’s free money!

With that said, the returns you’ll get from a traditional 401K aren’t anything to write home about. This is a safe, steady, and slow investment. If you can start early enough, 401ks are a great choice. It’s also worth noting that you cannot take out money early, or you’ll be subject to fees.

When investing in a 401k, your money is put to work across different investments like stocks, bonds, ETFs, and mutual funds.

Roth IRAs

A Roth IRA is very similar to a 401K with one key difference: how and when your contributions are taxed. With a Roth IRA, you will pay taxes before investing the money into your account. But, that is one of the advantages of a Roth IRA: you don’t have to pay taxes when you retire! That means all the returns you’ve generated are 100% tax-free.

There are traditional IRAs as well, but these are taxed as current income when you make withdrawals after the age 59 ½.

Just as when building your 401K, you can allocate your investments across different vehicles with a Roth IRA too. That includes stocks, bonds, real estate, CDs, and more. The specific allocation is up to you – but you’ll want to ensure a diversified portfolio. 

One option is to get professional help to navigate this process. But do you really need a financial advisor? Most of the time, financial advisors aren’t worth it compared to their fees. With just a bit of self-education, you can do the exact same thing they do – for free! You just need the right tools – more on that later.

Real Estate

There are quite a few ways to invest in real estate. And despite the ever-changing trends in the housing market, this is still one of the safest investments you can make – especially for retirement where you aren’t concerned with the year-to-year changes in the housing market.

There are a few ways you can use real estate as part of your retirement investing strategy. You can buy multi-family housing or rent out single-family homes. This is a great way to create generational wealth. You can use the rents your tenants pay to boost your quality of life during retirement. Or, you can sell your properties as you approach retirement and use that lump sum as your retirement savings.

The only problem with real estate is that it can be tough to get into. And, if you’re renting properties, you’ll need to either manage them yourself or hire a property manager – cutting into the returns you earn. That’s where REITs come in.

REITs are an asset you can trade on the stock market. These are essentially “funds” for real estate that track the performance of real estate investment firms. They’re an accessible way to get into real estate investing if you don’t have the down payment for a house. 

Individual Stocks via Your IRA

When you think about investing for retirement, you undoubtedly think about the stock market. And that’s because even simple retirement accounts like 401Ks and IRAs all use the stock market. Most of the time, though, those planning for retirement will take the simple approach to investing money for retirement: allocating cash across a mix of ETFs or mutual funds.

And while this can still be a part of your strategy, there is a way to generate higher returns. Rather than simply investing in ETFs or mutual funds via your 401k/IRA, you could consider investing in individual stocks in your IRA.

We’ll discuss the advantage of doing this below in greater detail. But basically, this allows you to maximize the ROI of your investment by finding winning stocks that are appreciating faster than the general performance of funds. 

You can get started easily with small account trading and earn huge returns over the course of a few decades – much higher returns than if you just invested in a simple IRA or 401k. The trick is to learn how to find good stocks for retirement. You obviously want to stick with safe stocks that will stand the test of time and slowly appreciate over the years. 

This is easier said than done. But with the right tools, even a complete beginner can start trading the stock market at a high level of confidence and a high rate of success. 

First, take the time to learn about trading in general. Learn how the stock market works, and learn about analyzing stocks. There are so many indicators for trading that you can use to help you build a retirement portfolio that unlocks your dream retirement lifestyle. Once you have read through a trading strategies guide, you can hit the ground running. At that point, it’s just a matter of managing your portfolio over time.

Why is the Stock Market the Best Way to Invest Money for Retirement?

Taking all four of these approaches to retirement planning into account, one stands alone as the premier choice. And that’s the stock market. Why? There are a few reasons.

First, it can be easily tailored to your unique goals. Maybe you want nothing more than to save for a lucrative retirement. If that’s the case, you can invest in safe dividend-paying stocks & long-term trading strategies. Or, maybe you want to generate supplemental income in the here and now. If that’s the case, you can try strategies like swing trading or day trading. You can even invest in the best index funds for retirement through the stock market.

Making changes on the fly is super easy, too. You can trade single stocks within your IRA or 401k using the VectorVes system when and where possible to maximize your ROI. And because you’re trading within your retirement account, you still get to take advantage of the tax benefits that come with an IRA or 401k. You’ll only pay taxes when you do eventually withdraw or distribute funds once you’re of age. Just sell your stocks and use that money as necessary. 

Now, you may be thinking to yourself – I’m not equipped to trade the stock market – I need something easier. Or, maybe you want someone to do all the hard work for you. As we mentioned earlier, investing in the stock market for retirement is a low time commitment and can be super straightforward. You just need the right tools. And that’s where VectorVest comes in.

This stock analysis software does all the heavy lifting for you while simplifying investing along the way. You don’t need to waste your time filtering through charts or analyzing different indicators. Instead, just pull up the system’s best stocks for retirement and choose the highest-rated options. It’s really that simple.

Our system has outperformed the market and called every major market move for decades now. It works – and if you can just trust the process and follow it, you’ll be well on your way to a comfortable, lucrative retirement life. 

Ready to Take Your Future into Your Own Hands?

If you’re ready to take your future into your own hands and start making your vision of dream retirement a reality, it’s time to take action. There’s no doubt that the stock market is the best way to invest money for retirement – at least, with the right tools and resources. 

With that said, you shouldn’t put all your eggs in one basket. While taking an active approach to stock market investing is an important step to achieving your retirement goals, we encourage you to invest in other retirement options like real estate, while also contributing to either a 401K or IRA.

If you’re still not quite sold on the VectorVest system, you can see it in action yourself with a free stock analysis here. You can even take your retirement planning on the go with our mobile stock advisory app!