Most people need to save more money for retirement. According to a report by Vanguard, the average American had about $141,500 saved for retirement. At the recommended annual withdrawal rate of 4%, it will only give them about $5,660 per year to live off of in retirement. 

Given those numbers, future retirees must amp up their savings rates and returns to retire comfortably. Here are the three best ways to invest for retirement to grow your nest egg to a more meaningful level.

Keep things simple with index funds

The easiest way to invest for retirement is to buy an index fund. These exchange-traded funds (ETFs) aim to deliver returns that match the underlying stock market index, such as the S&P 500. The best index funds have low ETF expense ratios, enabling investors to keep more of their returns.

Two top options for future retirees to consider are the Vanguard Total Stock Market ETF (VTI 0.66%) or the Vanguard S&P 500 ETF (VOO 0.62%). The total market ETF gives investors broad exposure to the entire U.S. stock market as the fund holds nearly 4,000 stocks. Meanwhile, the S&P 500 ETF holds shares of the 500 largest companies in the country. Both ETFs have ultra-low expense ratios of 0.03%. These funds enable investors to earn the average stock market return. For the S&P 500, that has been around 9.4% annually over the last 50 years. At that rate or return, a $250 monthly investment would grow into $1 million in about 37 years. That would provide a retiree with about $40,000 of annual income at a 4% yearly withdrawal rate. 

Boost your returns with dividend growth stocks

Investors can earn higher returns than an index fund. While some investment options require taking on more risk, investing in dividend growth stocks (i.e., companies that steadily increase their dividend payments) offers the potential for earning higher returns with less risk.

According to data from Ned Davis Research and Hartford Funds, companies that have either initiated or grown their dividends consistently have delivered a 10.7% annualized total return over the last 50 years. Further, they have achieved those higher returns with lower volatility compared to the S&P 500. 

Investors interested in adding dividend growth stocks to their retirement portfolio can buy an ETF focused on companies that grow their dividends or individual dividend stocks. A top ETF option is the iShares Core Dividend Growth ETF (DGRO 0.63%). That ETF holds nearly 450 dividend-paying stocks with a history of sustained growth. 

Meanwhile, investors have many individual stocks they can choose from to add dividend growers to their portfolios. A great place to start is the list of Dividend Kings, companies with 50 or more years of consistent dividend growth. Notable names on that list include consumer products behemoth Procter & Gamble, with 66 years of dividend growth, and beverage giant Coca-Cola, with 60 years of steady increases. 

Enhance your returns and reduce risk with REITs

Real estate investing is another retirement strategy because it provides the potential for passive income and price appreciation. While a hopeful retiree can purchase an investment property to reap those rewards, investing in real estate investment trusts (REITs) is an even easier alternative. REITs have historically produced higher returns than stocks with lower volatility.

Retirement-minded investors can purchase a REIT ETF or shares of an individual REIT. A top REIT to consider is Realty Income (O 1.36%). It lives up to its name. The REIT pays an attractive monthly dividend (with a current dividend yield of 4.4%) that has steadily grown over the years. It has increased its payout in each of the last 101 consecutive quarters. That steadily rising dividend -- driven by rent growth and property acquisitions -- has helped Realty Income deliver an average annual total return of 14.4% since its public stock market listing in 1994. 

Great ways to grow your retirement nest egg

Most people need to save and invest more money for retirement. They also need to ensure they're earning the best risk-adjusted returns on their money. Because of that, index funds, dividend growth stocks, and REITs are among the best investments a future retiree can make because they historically produce strong returns with less risk than many alternatives. That will help grow a retiree's portfolio to a larger size so they can enjoy a more comfortable retirement.