Why do we need retirement planning?

Had a chance to read some books the past 2 weeks while I was away (yes, that was why my blog seems to be devoid of posts :p ). I guess I would summarize what I read into my blog for my reference later. Note that I read the books from a layman perspective, and I do not have any in-depth training for economics.

Why do we need retirement planning? One word. Inflation. Price of a good/service will not cost the same in the future. A simple example. 20 years ago, I can get a bowl of wanton noodles for $1.50. Now, it costs $3.00. The price of a bowl of wanton noodles increased 3.55% compounded, annually. The 3.55% is called inflation.

That was also the reason why I was so frustrated previously about the government's high-handed way of forcing us to buy annuities. I've written about it previously. Just imagine... You put in a sum of money into this annuity at 65 years old, which will only pay me $200-$300 20 years later. We are now talking about $200-$300 in today's dollars now. For those people who are not yet 65, can you imagine how many years we are talking about? Anyone can guess the cost of living when we are 85 years old? Give you a hint... The government recently just said inflation might hit 5% 1st quarter of 2008 (just compound the inflation rate until 85 years old).

One can say... I put money into my savings account every month. What's the interest we get for our bank savings account? 0.25% to 1.x% per annum. See the disparity between the savings rate, and the inflation rate? The inflation rate is hovering around 2.7% to 2.9% since the increase of GST in July.

Therefore, retirement planning is important to all of us, and we should start planning right here, right now. The earlier we start, the more we can save for retirement. There are many financial planners/advisers that are trained in this area. However, my aim for reading up on this is so that we can guard against advisers that might want to take us for a ride, and treat us as their retirement planning (There are good planners and advisers out there by the way).

Will talk about the most important part of retirement planning in my next post on retirement planning. Savings... :)