I use the word quite often. Mental retardation is when a person is unable to reach average mental capability and it does become a handicap.
Even people with average IQs do things that hint towards mental retardation. Even though that isn't true retardation, I say that is equivalent to what a retard would do.
Some words such as the n word are primarily derogatory. At one point, the word may have referred to African Americans in an unbiased tone, but it does not any more. Retard on the other hand, referees to somebody with mental retardation. It indicates that the person is intellectually challenged. Saying handicapped is better, is just preference. If handicapped became the term for anything that affects human performance, possible treatment or help would be impossible because you would never specify the condition. Somebody who is handicapped with a broken arm and somebody who is handicapped with mental retardation are different, and require different care, which is why the word retard is important.