If you want to be able to enjoy your latter years to their fullest, it can be worth investing some money beforehand. While you can survive on social security payments, you’ll likely be earning just enough to pay the bills. If you want money for hobbies, days out, parties, travel plans or good quality healthcare, you’ll need to set some money aside. 

There are several ways in which you can invest money towards your retirement. Below are just a few investment strategies to consider.

Get your employer to set up a 401(k)

A 401(k) is one of the most common ways to set aside money for retirement. It’s a savings account which is set up by your employer. A small contribution is paid directly from each of your wages into the account. The money put into your 401(k) is not taxed until you take it out during retirement. 

Employers tend to have the majority of control over their employees’ 401(k)s, including how much is contributed and where the money is invested. That said, some employers are willing to work with employees to invest the money in a way that they want – it depends how hands-on you want to be with your investment. 

Open up an IRA

An IRA is a different type of retirement savings account to a 401(k) – instead of being set up by an employer, you set it up yourself. This allows you to keep making contributions even if you’re not employed. An IRA has similar tax advantages – any money put into your IRA isn’t taxed until you withdraw it.

IRAs often offer more flexibility than a 401(k) when it comes to investment options. You can allow a bank or broker to invest any contributions for you, or you can use a company like Accuplan to take full control over where you invest. They tend to be a more hands-on form of retirement plan than 401(k). 

Opt for index funds

A 401(k) or IRA will only generate a decent return if it’s invested in the right places. If you’d prefer to manually control where to invest these savings, you should think carefully about your options. Some investment strategies can earn you a lot of money in a few years, but over twenty or thirty years they could be quite risky – how do you know that that trendy tech company or rising cryptocurrency is going to be around in 20 years time?

Index funds are one of the safest options. They are funds made up of lots of different stocks or bonds within a specific sector. For instance a green energy ETF is an index fund made up of stocks from green energy companies throughout the industry, which is more secure than investing in one energy company – one company may fail, but the entire industry is unlikely to. 

Consider buy-to-let property

If you already have access to a lot of cash and are looking for somewhere to invest it, buy-to-let property could be a fairly secure option. This involves buying a property and renting it out to tenants. The rent can be used to pay off the mortgage repayments, while earning you extra income on top. 

Of course, buy-to-let property does involve maintaining the property and finding good tenants. If you don’t want too much hassle, it could be worth hiring a property manager to help secure tenants and chase up monthly rent. Be wary that any income you make from renting a property is also taxable. 

Consider paying off your mortgage and downsizing

If you’re a homeowner and you’re able to pay off your mortgage before retirement, downsizing could make sense financially and practically. A smaller home can be easier to manage and get around, plus it may make sense if the kids have moved out and you now have lots of empty bedrooms. A smaller home will also be cheaper to buy and cheaper to run – you can sell your home, but your new home in cash and still have thousands left over to put towards your retirement spending. 

Many people do this and use the money to travel the world. Others are able to invest the money into their children and grandchildren. Alternatively, you could use the cash to simply supplement your day-today living. Of course, if your current home is a place of comfort that you’d like to stay living in during your retirement, downsizing may not be the best option. This post at Retire Guide explains more information on how to downsize.