Crazy With Retirement Planning

I was enjoying my afternoon tea in the office pantry, when a colleague who is also a friend of mine pop in. He was asking for my opinion, on how to spend the variable bonus, which our company has just given to all the staff. "Should I use it for the down payment for a new car, buy a new home theatre system or purchase the latest model of laptop in the market?" "Use it to plan for your retirement" was my replied.

Shocked and surprised with my reply, as he was expecting me to choose one of the three options given. He said "Are you 'crazy'? Planning for retirement in our late twenties!" "Retirement planning should start from the day, a person start working" I answered him. "Okay" was his reply, as he walk off shaking his head in disbelief.

Well, it is mentally very difficult for a person, especially young working adults in their 20s or 30s, to plan for an event like retirement. This is common, since many would rather, or must spend their extra money/income now. Most people will think "Why must I save money now, which I may not spend for 20, 30, 40 or even 50 years. Retirement planning can start later."

Planning for retirement is one of the most important but more difficult task, an individual or family can perform. Based on the statistics from recent surveys, conducted by Financial Management Institute around the world, it show that the vast majority of people wish to retire, prior to the age of 65. But, only a small minority have developed a detailed plan, that will allow them to realize their retirement dreams. Majority put their retirement hopes on their pension plan, which in many case, is not enough to live on in retirement.

I have read a number of financial articles, and learned that there are three important concepts, which form the foundation of the Retirement Planning Model. The three concepts are,
1) Time Value of Money and Real Rates of Return.
2) Source of Retirement Funds.
3) Choice of Investment Securities.
I will not illustrate on the concepts, as the information is easily available in the Internet. One of the must read book, which I would recommend for those who want to plan their retirement, at an early age, is the "Cashflow Quadrant - Rich Dad's Guide to Financial Freedom" by Robert T. Kiyosaki.

Retirement planning is something that can be easily neglected, since for many people, it is more satisfying to spend now for enjoyment, rather than save for a long-term financial goal, like retirement. Those doing so, may end up receiving short-term benefits, at the expense of major long-term pain. So, for the friends who read my blog. Start saving and plan your retirement early and enjoy your retirement, in time to come.