Many retirement-aged Americans are facing a harsh reality: They can’t afford to retire. When it comes to creating a retirement plan, saving money that creates income is key, and there are smart ways to build a retirement nest egg faster and easier.

“Amassing wealth is a methodical process and takes time,” says San Diego-based certified public accountant Leonard Wright. Before you start saving, determine your desired retirement lifestyle and what it will cost. Online retirement calculators and speaking with your employer’s 401(k) administrator can provide more insight on your nest egg goal.

“It’s positive control of your financial life,” says Brent Neiser, director of Strategic Programs and Alliances at National Endowment for Financial Education. As everyone’s plan is unique, he recommends that people research and understand their own goals instead of patterning strategies off someone else.

When creating a retirement portfolio, experts agree that it’s important to have different income sources that are accumulated over a long time horizon.

Employer Retirement Plans. “If offered, participate in your employer plan – this is free money going towards your retirement,” says Katie Ross, education and development manager at American Consumer Credit Counseling. “IRAs are also a good way to save towards retirement.”

By being committed to saving a certain amount of money from every paycheck, people can amass a large amount of money for retirement. “Saving money that you pretend doesn’t exist is a strategy only if you don’t tap it,” says Laurence Keiser, certified public accountant and partner at Stern Keiser & Panken, LLP. “You should take advantage of these if you can afford to. The beauty of a 401(k) is that it’s tax deductible, the money builds up, and the income is tax free.”

Employer 401(k) plans generally include a dollar-for-dollar employer match up to a certain percentage. “This is the easiest free money you will ever come across. If you can afford to invest more, even if your employer doesn’t match, push the limit as long as it is manageable,” says Ross.

According to IRS guidelines, money deposited into a tax-qualified deferred compensation plan like a 401(k) is included as wages for Social Security, Medicare, and federal unemployment taxes, but not taxed. The income earned from buying and selling securities, interest, and dividends, for example, is taxed as a lump sum when money is withdrawn at the account holder’s tax rate. There is a 10% penalty for withdrawing before 59.5 years old.

“The theory is that when you take money out down the road, you’ll hopefully be in a lower tax bracket,” says Keiser. “You have to start taking distributions at age 70.5, regardless of whether you’re retired.”

Roth IRAs. Experts recommend diversifying your retirement tax liabilities by opening a Roth IRA. These retirement accounts hold post-tax money, as withdrawals are not taxed. In 2012, up to $6,000 can be deposited into an account depending on age and income levels for people who are married filing jointly earning less than $183,000 and single individuals earning less than $125,000 per year can.

Choosing the Right Securities

“Over long periods of time, think how you’re going to invest for 30 to 40 years,” says John Ameriks, principal at Vanguard. “The price tags for funds with fees can be high.” If you own a fund with a 1% fee that’s paid every year, for example, after 40 years, 40% of your investment will have gone to another company. “Actively- managed funds have higher fees than what you’d see in an index fund,” he says. “Index funds, on average, have a slightly higher after-fee return.”

Having an appropriate allocation of stocks, bonds and cash boosts a portfolio’s performance. “Different investments perform differently at points in time, and you don’t know when one will take off,” says Wright. “Diversification helps you take advantage of the different markets.”

Ameriks recommends holding a few securities across asset classes. “Holding one stock or property does not diversify a portfolio,” he says.

If you are gearing up for retirement in one or two years, “set aside the money into a safer vehicle like a certificate of deposit, savings account, or other cash account that earns minimal interest,” advises Neiser. “Equities, for example, can create a hedge against inflation and are better suited for money that you won’t touch for three to four years.”

Annuities and Whole Life Insurance

The concept of whole life insurance and annuities are very similar. Cash builds up tax-free in both vehicles but annuities don’t give the life insurance protection. “An annuity is a life insurance policy for living too long,” Wright says. “They can provide a permanent payment stream for the rest of your life.” To purchase each policy, holders make regular payments. To cash in on the policy, whole life insurance is paid lump sum while annuities provide regular payments for a period of time.

“You can buy life insurance products, but you don’t get a deduction,” says Keiser. A whole life insurance policy can build up a cash value that you can borrow against tax free. The borrowed amount reduces the value of the policy if never paid back.

“Life insurance and annuities provide special opportunities but they also have risk,” says Wright. “Traditional products are tired and true but very boring. They’re a complement to a diversified portfolio.”

If you decide to purchase life insurance or an annuity, experts advise reading the fine print to understand how the products work and whether there are any complex caveats.

Investment Properties

“Real estate can provide growth and income,” says Wright. “Depending on where a home’s located, as housing prices continue to drop, this could be a good investment.”

While some consumers are still hesitant to jump into the still battered real estate market, experts agree that purchasing an investment property can be a good investment for the long-term if they have enough money outside of an emergency fund for a down payment and are able to qualify for a mortgage. “People who know real estate are buying more now than they did in the last couple of years,” says Keiser.

Purchasing an investment property can’t be done on a staggered basis, but you can think of the mortgage payment as savings, says Keiser. “Historically, real estate has appreciated, but that’s not 100% true these days.”

When considering an investment property as a way to diversify your portfolio, Wright recommends researching the market for both sales and rentals and determining whether it’s more cost effective to rent than own.

“If you buy investment property, look to see that there’s a positive cash flow, that you’re comfortable dealing with people and tenants, and that you have adequate insurance on your property,” says Wright. When looking at property, the rent should be higher than the mortgage payment, taxes, insurance, and maintenance expenses combined. “As long as your property is rented, it can provide a steady cash flow stream.”