By investing in top FTSE 100 stocks, even those who are late to investing can build a healthy nest egg for retirement. Here’s what I’d do if I was 40 and looking to retire a few decades from now.

Cut tax

My first act would be to reduce (or even eliminate) any payments to the taxman. I’d do this by opening an Individual Savings Account (ISA) and/or a Self-Invested Personal Pension (SIPP).

With these financial products, I wouldn’t pay any tax on either capital gains or dividend income. Over time, this can add up to a considerable amount.

On the downside, I won’t be able to access my SIPP savings until I hit my late 50s. But if I’m saving for retirement this shouldn’t be a problem.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Diversify

Next, I’d aim to build a diversified portfolio of FTSE 100 stocks. Putting all of one’s eggs in a single basket can significantly increase risk and limit one’s chances to grow wealth over time.

So I would:

• Invest across many different industries to protect my portfolio from sector-specific downturns
• Buy cyclical stocks (like banks and retailers) alongside defensive shares (such as utilities and defence companies), thus balancing my performance across economic cycles
• Invest in both growth and dividend shares, with the former providing significant upside potential and the latter supplying a stable income

There are three ways I could achieve this: I could invest in a FTSE 100 tracker fund; choose individual shares to buy; or both.

But by selecting specific shares, I have an opportunity to make a market-beating return over time by capitalising on my own research and insights.

Legal & General Group (LSE:LGEN) is a top Footsie share I’ve just added to my own portfolio. It has a long record of growing its dividend and offering market-beating yields. And for the next three years, its yield ranges between 9.3% and 10.5%.

Competition across its markets is intense. Yet I believe the business has a considerable opportunity to grow earnings over the next decade. With elderly populations soaring across the globe, demand for wealth, retirement and protection products is also rising sharply.

Excellent cash generation also makes Legal & General a top buy in my book. The firm expects to generate £5bn-£6bn of excess capital between 2025 and 2027, which would allow it to invest heavily for growth and continue to offer huge dividends.

Add FTSE 250 shares

My next step would be to supplement the FTSE 100 stocks in my portfolio with some choice shares from the FTSE 250 index. This part of my strategy could substantially boost my chances of building a retirement pot in a short space of time.

The Footsie’s long-term average annual return stands at a decent 7.5%. But the FTSE 250’s is an even-better 11%.

If this performance continues, a £400 monthly investment spread equally across both indexes would yield £771,574 after 30 years. This could then provide me with a £30,863 passive income if I drew down 4% a year.

Combined with the State Pension, this would likely give me a big retirement pot to live comfortably on.