Investing for Retirement

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Table of Contents

Planning for retirement can be difficult and understandably, it’s something that a lot of people don’t like to think too much about before the time comes.

Taking a bit of time to plan for your financial future, however, and the source of your income when you stop working, is extremely beneficial and can diminish much of the financial uncertainty that accompanies retirement.

There are a number of factors to consider before deciding which retirement investment strategies are best for you, including things like life expectancy, investment risk and the amount of money you can comfortably invest in the future.

You should also think about whether you would prefer to use pension savings to withdraw income flexibly (known as a pension drawdown) or take out a number of lump sums in order to fund your retirement.

Traditionally, regularly paying into a personal pension is one of the most common and popular forms of retirement investment, but it’s important to remember that this isn’t the only way to secure an income for later life.

Although paying into a workplace pension, or a private one if you’re self-employed is highly recommended, there are a range of other investment strategies that can complement and even enhance what you have in your pension pot, allowing you to reap the rewards you’ve earned during your working life.

Here, we’ll run through some of the best retirement investment strategies along with the most important factors to consider when trying to make your capital grow over time in preparation for retirement.

These can enable you to build a healthy retirement fund and prepare for your future income needs.

Additionally, some of the most frequently asked and important questions regarding retirement investment will be addressed.

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Saving or Investing For Income in Retirement - Which Is Better for You?

Before diving into the five best retirement investment strategies, it’s important to consider the benefits and drawbacks of saving vs investing and which option may be more suited to you personally.

What individuals decide to do with the money they set aside for retirement varies depending on things like their income, retirement plans and also the risk tolerance they have when it comes to their personal capital.

Whether you want to save or invest for when you reach retirement age will ultimately determine what type of retirement investment (if any) suits you best.

Whether the money that you regularly contribute to a pension or savings fund will be enough to sustain you in retirement, or if you want your money to grow over time to allow you to enjoy a more comfortable or activity-filled life after work, will help you decide if saving or investing is better for you.

Either way, it’s still good to take some time to seek financial advice and explore a variety of investment plans for retirement, even if you decide not to go through with any.

Let’s take a quick look at saving and investing for income in retirement.


When it comes to retirement investment plans, saving is widely regarded as the safer option.

Importantly, savings won’t really change in value over time and by regularly depositing cash into an individual savings account (ISA), you’ll be able to keep track of what you have in terms of a retirement fund and begin to see what kind of lifestyle you can afford as you approach pension age.

Money is also a liquid asset, so you can make withdrawals and use it to buy and pay for things directly at any time.

In contrast to capital used to generate a retirement investment income by purchasing specific assets or shares, cash savings can be withdrawn and used at will, which is an important option to have in case of an emergency.

If investing is something you feel you might want to consider in the future, having savings will also give you the option to do so when you have more time to develop a responsible investment strategy and build an investment portfolio.

Additionally, having a savings account to dip into also offers a degree of protection if a particular investment doesn’t work out.

Drawbacks to Saving

Although it has obvious benefits, saving is not necessarily as safe and assured as it may seem when it comes to building a retirement income.

A key contributor to this is the inevitable changing rate of inflation. In simple terms, this refers to the sustained general increase in the cost of living over a certain period of time.

Importantly, savings can actually bring negative returns following a period of inflation.

While the money held in a savings account won’t necessarily decrease in value if it is being saved over an extended period of time – in preparation for retirement for instance – inflation has the potential to erode the buying power of your capital from when you initially started saving it.

This is comparable to suffering a loss after committing money to a particular investment. Although it may not be as initially damaging, it can have equally counterproductive effects when trying to achieve financial retirement goals.

This is where developing an effective retirement investment plan is particularly useful.

Why Make a Retirement Income Investment?

In contrast to depositing your money into a savings account, investing gives it the opportunity to grow over time and can serve as a means of regular income in retirement.

In addition, this saves you from having to withdraw lump sums from your account on a regular basis, which would eat into retirement savings that may be required in emergency circumstances.

With any investment, there is a certain and relatively unavoidable degree of risk attached, so seeking the advice of a credible and experienced financial adviser is a good idea before making an investment for retirement.

However, the potential rewards – namely financial freedom and security after work – can vastly outweigh the initial chances that are taken when putting retirement investment plans into action.

Benefits of Retirement Investment

Perhaps the most obvious benefit of a retirement income investment is that it has the potential to earn higher returns than can ever be achieved by saving.

Moreover, investing in various markets – be it stocks and shares or buy to let property – offers a significant degree of protection against inflation.

Investing in a buy to let property, for instance, can bring high returns during a period of inflation as rental values often increase with the general cost of living. This serves to fend off the worst effects of high inflation rates for owners of rental property and is an excellent retirement investment strategy.

In any case, there is a range of investment options when it comes to planning for a secure financial future, with some pension providers even offering ready-made investment options to help individuals to decide how to invest the money left in their pension pot.

Some pension plans also provide the option of investing in an investment pathway, which is effectively a ready-made investment option linked to a number of different retirement goals that you can choose from.

With that, let’s look at the best ways to generate a retirement investment income and how to make a smart retirement investment UK.

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Retirement Investment Strategies

When it comes to making a lucrative retirement income investment there are a number of go-to options, the most common of which include investing in buy to let property and purchasing shares in the stock market.

These certainly aren’t the only options available in terms of investment plans for retirement and it’s important to remember that investment decisions should be made based on individual circumstances with the appropriate amount of financial planning and investment advice.

Ideally, when you reach retirement, you want to have developed a steady passive income stream that will enable you to enjoy life after work, eliminating the worry of regularly tapping into a savings fund that isn’t being replaced.

In order to do so, it’s better to begin your investment journey as soon as possible.

So, let’s take a closer look at some of the best investment options for retirement.

1.) Buy to Let Property

2.) Stock Market

3.) Defined Contribution Plans

4.) Index Funds

5.) Investment Trusts

1.) Buy to Let Property Investment

Put simply, this is the process of buying a property to rent to tenants.

As far as investment options for retirement go, owning a buy to let property is one of the best forms of generating a regular passive income as investors earn recurring monthly sums through rent.

Importantly, properties are also subject to capital appreciation, meaning they have the potential to increase in value over time.

Naturally, the longer you’re invested in a buy to let property the more you stand to gain, making it an ideal long-term retirement investment strategy.

This also widens your options financially as you draw nearer to retirement. For example, you may decide to retain your property for the regular rental income, or – if its value has increased significantly since the initial purchase – sell it, use the lump sum as a handsome retirement fund and enjoy a work and stress-free life.

The UK Market 2023

This is particularly applicable to the current UK property market which experts predict will experience steady growth across the board over the coming years.

According to Savills, property prices will increase by an average of 6.2% across the UK between now and 2027.

Notably, some high-performing regions such as the North West are set to witness a property value growth of as much as 11.7%, where key cities like Liverpool and Manchester stand out as some of the best places to invest in UK property.

Where is Best to Invest for Retirement?
  • Liverpool
  • Manchester
  • Birmingham
  • Newcastle
  • Leeds

Due to a number of external factors including the ongoing cost of living crisis and a recent period of political instability, property prices are set to drop by an average of 10% this year, making 2023 an opportune time to consider buy to let property as a retirement investment UK.

Hands-Off Investment

As mentioned above, in an ideal scenario the best investment for retirement will have the potential to serve as a passive income stream. After all, at this point, you’ve done your work and have earned the right to enjoy those things that time and money may not have allowed for in previous years.

This can be easily achieved with buy to let property by employing the services of a property management company that will take care of all landlord duties including finding a tenant and maintaining the property.

This is known as a hands-off investment strategy and being high-earning while requiring very little work, is one of the best retirement investment plans.

Additionally, the entire investment process can be made seamless and stress-free by going through an experienced property investment company that will help you identify the perfect investment property to suit your budget and support your financial needs in retirement.

2.) Stock Market Investment

Potentially one of the highest and fastest earners when it comes to investment, purchasing stocks and shares is the traditional high-risk high-reward strategy.

This enables investors to effectively purchase fractions of a particular company while investing in multiple stocks or shares will increase your overall income through dividends.

What’s perhaps most attractive about contemporary stock market investing is how accessible it has become through the use of investment websites and apps. There are also endless resources online where you can learn the ins and outs of investing in stocks and shares even from the beginner level.

Now, while there is such a thing as luck and stumbling across a perfectly-timed investment, in most cases, building the sort of versatile and high-earning portfolio that can sustain your finances in retirement requires a significant amount of research, market insight, and regular monitoring of how your shares are performing.

There are also a lot of uncontrollable factors that can cause the value of investments to fluctuate at any given moment so it’s important to know that while you could be flying high one minute, the strength of your portfolio could decrease dramatically the next.

Effectively a form of betting, unlike the property market which is much easier to predict, stock market investing has a much higher potential to change unexpectedly making it quite a risky retirement investment strategy.

Therefore, while its ability to be a lucrative income stream is undeniable, it may not be the best investment for retirement to hinge the majority of your finances on.

3.) Defined Contribution Plans

Defined Contribution (DC) plans are among the most popular investment options for people approaching retirement age as they offer a form of tax relief for people who are preparing their finances for retirement.

As a retirement income investment, a DC plan is a strong and relatively straightforward strategy as it allows people to schedule money to be withdrawn from their wages and automatically invested into various high-performing investments.

The most common of these is a 401(K) plan through which employees make contributions to the plan with wages that aren’t considered taxable income, making this a tax-efficient retirement investment.

In a nutshell, any contributions made to this plan up until retirement will be able to increase tax-free over time. As long as they’re withdrawn after the age of 59 and a half, investment returns won’t be taxed.

A potential constraint of a 401(k) plan is the fact that it can be difficult to withdraw funds prior to retirement if you need the money in an emergency for instance.

In terms of retirement investment UK, however, DC plans are certainly an option worth exploring and can provide contributors with a comfortable retirement fund to enjoy after working life.

Types of Defined Contribution Plans

    • 401(k) Plans
    • 403(b) Plans
    • 457(b) Plans

4.) Index Funds

A slightly lower-risk option than investing in individual stocks and shares, an index fund is effectively a collection of stocks that mirrors the stock market’s overall performance in a particular area.

By mirroring this performance through what are known as indexes, this method of investing is a way of spreading the risk across a range of stocks as opposed to hedging all your bets on one or a select few.

More often than not, the market as a whole will usually outperform an individual stock or investment in the long term, making this one of the more stable retirement investment options.

For reference, some of the best know index funds include:

  • American Vanguard 500 Index Fund – tracks the S&P 500.
  • iShares Core FTSE 100 UCITS ETF – tracks the FTSE 100.
  • Russell 2000
  • Bloomberg Barclays US Aggregate Bond Index

While the fact that you don’t have to choose which individual stocks to invest in can be seen as a benefit of index funds – particularly in retirement – some people may prefer that bit of control over where their money is being invested, so again it goes back to personal preference and circumstances.

As a whole, index funds are seen as a good option when it comes to investment for retirement, with investment guru Warren Buffet citing them as one of the better retirement investment strategies.

However, like regular stock market investing there is some uncertainty attached and they remain much harder to predict than the buy to let property market for instance.

5.) Investment Trusts

Investment trusts are similar to index funds in that they are a collection of company shares that can be purchased in a single investment.

Uniquely, thanks to the cash reserves they can hold, investment trusts can offer a more reliable regular dividend which is highly desirable to many investors – particularly those who may no longer be earning a regular income.

At any given time, investment trusts can distribute up to 15% of profits to shareholders which offers a degree of flexibility that many investment strategies don’t afford.

This is an important point, particularly with regard to retirement investment options, as investors can get access to their shares when required.

Currently, the best investment trusts for retirement income include:

  • Scottish Mortgage Investment Trust
  • City of London Investment Trust
  • F&C Investment Trust
  • Greencoat UK Wind
  • Blackrock World Mining Trust

As with any investment method, investment trusts have their risks and by no means do they guarantee a lucrative retirement fund. However, in terms of building a diverse portfolio, they are well worth looking into and these five best investment trusts for retirement income are a great place to start!

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Investment Retirement FAQS

  • What is the Best Investment for Retirement?
  • What is the Best Retirement Investment Plan?
  • What Investment Return Should I Expect in Retirement?
  • What is the Safest Investment for Retirement?
  • How Much Investment for Retirement is Needed?

What Is the Best Investment for Retirement?

Identifying and developing an effective investment retirement strategy requires a significant amount of thought and planning.

It’s important to remember that going down the conventional route of regularly contributing to a pension fund or personal savings account is absolutely fine and may be more suited to your personal preferences and financial circumstances.

But if you would like that extra bit of financial security or a regular passive income when you finish work, there are many excellent retirement investment options out there.

At present, the investment strategy that emerges as the best investment for retirement UK in 2023, is buy to let property.

With the highest growth potential and traditionally one of the easier markets to predict, buy to let property can provide a regular, lucrative and completely passive income stream, which can significantly boost the value of your bank account in retirement.

To learn more about how to invest in UK property, take a look at RWinvest’s free guide.

What Is the Best Retirement Investment Plan?

As outlined above a retirement investment plan can be as flexible and versatile as you want it to be and will vary significantly based on individual preferences and financial circumstances.

Making regular contributions to a pension fund is always a recommended course in preparation for retirement and while some might think you have to choose between building your pension pot and investing, this isn’t necessarily the case.

A pension pot or a savings account offers great financial safety and is indeed an investment retirement fund in and of itself.

An ideal situation would enable you to divert some funds to either of these while directing the rest toward a lucrative long-term investment like buy to let property for instance.

Importantly, this doesn’t always require a massive financial contribution and with the right research and financial advice, an affordable investment opportunity can certainly be found.

The 4% Rule for Investing in Retirement

In terms of managing your finances in retirement, whether the money is generated from previous investments, a pension or a savings fund, following the 4% rule in retirement is a recommended course.

As planning out how much you can afford to spend in retirement can be difficult, this rule acts as a useful guide and can make your capital go further than you may have initially thought.

Basically, it recommends that in the 1st year of retirement, you should only really spend up to 4% of your total retirement fund.

Although unforeseen circumstances may increase what you have to spend, or you may even end up withdrawing less in a given year, it’s important to have some sort of guide to go by in terms of your retirement spending.

What Investment Return Should I Expect in Retirement?

Obviously, your investment return will depend on what area you decide to invest in and how much money you contribute to it.

If we stick with our top pick in buy to let property, excellent returns can be made on a monthly basis through rental income long before you retire.

This can allow you to put a significant amount of money into a retirement pot when you’re still working while selling the property for a strong profit when you retire will still be an option.

At present, UK rental properties earn an average of £1,185 per month (£14,220 per year), which is a good indicator of how much can be earned regularly with an investment in the buy to let market.

In addition, experts are predicting average rental growth of 9.9% over the next few years which would significantly increase the value of such an investment.

House prices are also expected to rise by an average of 6.2% between 2023 and 2027, with top-performing regions like the North West expecting property value growth of at least 11.7%.

This presents an excellent capital growth opportunity where an investment in property now could lead to a significant profit in the future, or come retirement time.

What is the Safest Investment for Retirement?

Again, buy to let property is the stand-out investment in this regard.

Although it may require a more substantial initial investment, buy to let property is traditionally one of the most secure investments out there as the market is much easier to predict than the likes of company stocks and shares.

By enlisting the advice and services of property investment and rental management companies, investors can add further security to such an endeavour, receiving expert guidance and support through the entire process.

Additionally, by taking the time to research and invest in the right cities and regions, investors can secure a property that will earn them a lucrative passive income for years to come.

What is the Best Investment to Retire at 55?

Above all, if you’re hoping to retire early – say at aged 55 – the key is to start saving or investing well in advance.

Not only will this allow you to build a healthy retirement fund during your working life, but it will also enable you to keep track of what that fund will look like and the sort of retirement you can enjoy financially.

In terms of generating a regular income that you can use to build a retirement fund, rental returns earned through a buy to let property are difficult to match.

Additionally, these earnings won’t vary much either monthly or yearly making them a lot more stable and assured than money earned from stock trading for instance.

With the UK pension age currently set at 66 and expected to increase gradually from May 2026, developing a regular passive income stream through a buy to let property or even a property portfolio is the best retirement income investment to make if you want to retire at 55.

How Much Investment in Retirement is Needed?

Heavily dependent on your retirement goals and the kind of lifestyle you want to lead when you finish work, the amount of investment needed in retirement will vary among individuals.

So, when researching different investment options, always keep your personal circumstances and preferences front and centre.

Stock market investments can really be made for as much or as little as you want, with some individual stocks costing less than £1 and others worth well over £100.

But to earn enough money to realistically sustain retired life, you’ll need to invest significant funds on a fairly regular basis and monitor how your shares rise and fall. That or make an educated bet on a fast-growing start-up, which of course can happen too!  

In terms of buy to let property, typical average prices in thriving and affordable UK cities like Liverpool currently sit at just over £181,000 according to the Land Registry.

While this does warrant a significant investment, there is a range of options that can make buy to let property an affordable option.

For instance, flexible payment structures for the purchase of off-plan properties can allow you to secure a high-earning investment for initial payments of around £37,500. The yields generated from such property will provide you with a lucrative retirement investment income stream even before you finish work.

In any case, when it comes to investment retirement strategies, it’s essential to know how much you’ll need to financially sustain your post-working life.

Therefore, knowing how much a particular investment has the potential to earn is important and can be figured out using an investment calculator.

If you’ve reached the end of this blog we hope that it’s offered some insight into investing in life after work and perhaps brought you a step closer to realising what the best investment for retirement may be for you!

Get started with UK property investment today by enquiring about one of our latest investment opportunities to kickstart your financial future.

Patrick Faulkner

Patrick Faulkner

Patrick is a property content writer at RWinvest. Keeping a close eye on the UK property market, Patrick helps our readers stay informed and up to date on the latest market news and statistics.

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