Investing in PSU bonds can be a great option for those planning for their retirement. PSU bonds
are issued by government-owned companies, which makes them a safe investment option. In
this blog, we’ll discuss why investing in PSU bonds for retirement can be a smart move.
Stable Income Stream
One of the most important factors to consider when investing for retirement is to ensure a
steady income stream. PSU bonds offer a stable income stream in the form of interest
payments. The interest rates on are generally higher than other fixed income
investments such as bank fixed deposits and government securities, making them an attractive
investment option for retirees.
Low-Risk Investment
PSU bonds are considered low-risk investments as they are issued by government-owned
companies. The probability of default is low as the government-owned companies have the
backing of the government. This makes them a safe investment option for retirees who are
looking for investments that offer low risk.
Long-term Investment Horizon
Retirement planning involves investing for the long term. PSU bonds come with different
maturity periods ranging from 1 year to 20 years. The long-term maturity periods make them an
ideal investment option for those planning for their retirement. Retirees can choose bonds with
maturity periods that match their retirement timeline, providing them with a steady income
stream throughout their retirement years.
Tax Benefits
Investing in PSU bonds can offer tax benefits to retirees. Interest earned is taxable as per the investor’s income tax slab. However, certain is tax-exempt under section 10(15)(iv)(h) of the Income Tax Act, 1961. The interest earned on these bonds is tax-free, making them an attractive investment option for retirees looking for tax-efficient
investments.
PFC Tax-Free Bonds
Power Finance Corporation (PFC) tax-free PSU bonds are a popular choice for investors looking for tax-exempt income. These bonds offer a fixed interest rate of up to 5.88% per annum and come with a tenure of 15, 20, or 25 years. They are rated AAA by rating agencies like CRISIL, ICRA, and CARE, indicating a high level of creditworthiness.
Liquidity
PSU bonds are easily tradable, making them a liquid investment option. Retirees can sell their
bonds on the secondary market if they require funds. The liquidity of ensures that
retirees have access to their funds when required, providing them with flexibility in their
retirement planning.
IRFC Tax-Free Bonds
Indian Railway Finance Corporation (IRFC) tax-free bonds offer a fixed interest rate of up to 5.63% per annum and have a tenure of 10, 15, or 20 years. They are rated AAA by rating agencies and are a good option for investors looking for steady, reliable income.
Conclusion
Investing in PSU bonds for retirement can be a smart move for retirees. offer a
stable income stream, are low-risk investments, have long-term maturity periods, offer tax
benefits, and are liquid. Retirees can choose bonds with maturity periods that match their
retirement timeline, providing them with a steady income stream throughout their retirement
years. As with any investment, it’s important to consider your investment goals, risk tolerance,
and tax implications before making an investment decision. A financial advisor can help you
make an informed investment decision and ensure that your retirement planning is on track.