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This 1 investing mistake could destroy your retirement plans and leave you in poverty

It’s easy to understand why so many retired Britons find it almost impossible to make ends meet. Pathetic wage growth over the past decade has made it extremely hard for people to put money away to offset the low State Pension. Those that have managed to save for their later years, meanwhile, have been rewarded with some truly-awful interest rates thanks to ultra-loose central bank policy.

To illustrate this point, my research shows the best-paying instant-access Cash ISA available today is from Virgin Money and offers a rate of just 1.43%. For argument’s sake, let’s say the product rate remains at this level for the next 25 years. Were you to put £10,000 into the account when you open it, and squirrel away an extra £500 every month over the period, this would deliver a total return of £194,228.

Bad returns

I don’t know about you, but I’m not that impressed. Interest of just over £34,000 for a total contribution of £160,000 seems a little light. It’s hardly the sort of return that’ll help protect you against a paltry State Pension, let alone help you live a life of luxury in retirement.

So why place your hard-earned cash in places that generate such rubbish returns? We at The Motley Fool believe the stock market is a much better way to make your money work for you. I’m sure the scores of Britons who have made millions investing their money in Stocks and Shares ISAs would agree too.

Big dividends for a great retirement

There are hundreds of great companies for investors to choose from right now to help you make a fortune for your retirement. Let me start you off with a few from the FTSE 100.

Barratt Developments

Shareholder returns over the past five years: 47.5%.

Current dividend yield: 7.3%.

Why it’s a top retirement pick: Barratt’s big dividends have delivered decent shareholder returns in recent years despite disappointing share price growth. The country’s vast homes shortage means it’s likely to keep growing profits and dividends for many years to come. Official estimates suggest up to 340,000 new homes need to be built each year, conditions that play into the hands of the UK’s biggest housebuilder.

National Grid

Shareholder returns over the past five years: 42.1%.

Current dividend yield: 5.8%.

Why it’s a top retirement pick: There’s not many safer ways to lock up your cash for retirement than by investing in the UK’s only designated electricity network operator. While the spectre of renationalisation has returned more recently, the chances of this actually happening remain small. Besides, National Grid has taken steps to ensure shareholders would be well-compensated in this event.

Diageo

Shareholder returns over the past five years: 111.3%.

Current dividend yield: 2.2%.

Why it’s a top retirement pick: Diageo’s a perfect example of how buying up dependable dividend growers, and not just firms with huge near-term yields, is a critical part of a sound investment strategy. The company’s near-term yield might not be the biggest, but its drinks labels are beloved by consumers like no other, allowing it to grow earnings and also dividends year after year. And the company’s commitment to product innovation should keep its cash cows flying off the shelves long into the future.

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Royston Wild owns shares of Barratt Developments and Diageo. The Motley Fool UK has recommended Diageo. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.