Considering that many people spend about a third of their lives in retirement, it should not be left to chance. Enter retirement planning; a financial planning method that attempts to adequately prepare you for the period in time in your life when you cease working. Retirement planning for young adults and more senior persons is important for at least five reasons:

1) The future is uncertain, but planning gives us greater influence over it.

2) If you do not plan, you risk outliving your life savings and surviving in poverty

3) The average person could spend about a third of their life in retirement

4) Inflation and purchasing power risk will affect our future income

5) We would be more prone to health problems and illness closer to retirement.

From a financial perspective, retirement planning involves considering what you want your golden years to be and how you are going to finance your dreams. Some questions that you need to consider when planning include:

a) When do I plan to retire?

Retirement can be either voluntary or involuntary, but you must have an idea when you would be most comfortable retiring. Statistics have revealed that those who retire earlier may have a longer life expectancy on average. Choosing when you retire can impact on how long and how well you survive later on in life.

b) How much would my retirement cost?

This would depend on a combination what you want your golden years to be like and adjusted living expenses. It would be important to assess today's living expenses and project future expenses on the basis of a projected average rate of inflation.

c) What sort of financial products should I have by the time I retire?

As retirement planning is a subset of financial planning, you need to understanding the changing role that products play in your life as your situation changes. Planning helps you think about these. Certain products are best accessed before you reach your retirement stage.

Your dreams would then be translated into goals and inflation adjusted targets. Retirement planning can be undertaken by any adult- even those who are in retirement already. Some key elements of planning are:

1) Dreams

Before you do anything, consider what you want your retirement to be like. Some people want to globe-trot, while others may prefer just being involved in community. For most people, maintenance of their standard of living and health issues are crucial. At this initial stage of planning, you just need to express all your expectations in non-financial terms.

2) Goals

Retirement goals help us to:
i) Allocate our current income effectively towards our retirement goals.
ii) Adhere to our retirement plan.
iii) Choose the right financial instruments.

Some of your dreams (like social activities) may appear to be free. In any event, being socially involved involves certain travelling expenses or funds to be able to attend events. The other dreams that are truly free (like preserving relationships) refer to the non-financial dimensions of retirement planning. For every dream, you can set tangible goals that will help you to achieve them.

It is important to convert your dreams to goals. Your retirement goals represent your retirement destination. Goals are measurable and help you monitor your plan. For example, if you want to maintain your standard of living throughout retirement, this suggests two goals:

i) That you want to have the majority of your pre-retirement income level throughout your golden years

ii) That you would need to have your income and portfolio protected against inflation.

3) Calculations

A retirement calculation determines what you need to do to reach your destination. It allows you to make certain reasonable assumptions to allocate resources and finances to your accumulated fund. When doing a calculation, you must factor in your goals.

4) Retirement vehicles

Once you've done your retirement calculation, you will have an idea of what you need to do. You will decide if you want to fund your retirement through annuities, pension plans, mutual funds or stocks for instance. No matter what your location is, you would have a choice of retirement vehicles among cash, income and growth options. You must diversify your accumulated fund based on your goals and your investment horizon.

While retirement planning is dominated by financial considerations, this should not be the case. The social and psychological aspects of planning are vital in establishing a comfortable and satisfactory future. The reality is that our world and how we live in it is influenced by finances.