A retirement financial advisor works with individuals to help them prepare for retirement. This may involve helping a person set his retirement goals and determine how much money he needs to be able to retire comfortably and meet those goals. A retirement financial advisor may also give investment advice, help clients balance their portfolios, and even purchase investments for his clients.
Saving for retirement is an important goal for working individuals, as one day every individual will likely need to stop working and turn to his savings, along with help from the government, to provide him with money to live on. In order to save for retirement, individuals put aside money which they then must invest. There are numerous ways to invest money for retirement, and for some individuals, deciding how best to do so can be daunting.
A retirement financial advisor generally begins by guiding the person toward determining how much he needs to save. Most investing experts believe it is important to save enough that the investments can generate sufficient income through interest and returns on the investment. This way, the investor can avoid touching the principal he has saved and is thus not in danger of spending down the total amount saved and running out of money.
To determine how much to save for the interest to generate sufficient income, it is important to know how much income will be required and what rate of return the investor is likely to experience. A retirement financial advisor can help a person answer all these questions. The advisor will use financial calendars and projections and calculators to help determine how much his client should set aside.
Once the client knows how much money to save, he must know what to do with that money. Different investments generate different rates of return, but also have different risk levels. For example, purchasing stocks — or shares of ownership in public companies — may have a higher potential rate of return than purchasing bonds, which are corporate or government debt.
The appropriate allocation of retirement money depends on the investor's age and tolerance for risk. Generally, investors should have a mix of risky and less risky investments, with the specific proportions of each varying depending on his age. An investor also typically wants to invest his retirement money in several different types of investments so he doesn't risk losing it all on one investment vehicle. A retirement financial advisor can help the investor decide on the right mix, achieving what experts refer to as a "balanced" portfolio.