- Are you a senior citizen worried about a suitable retirement fund with regular income?
- Is it confusing to choose from various options?
- Are you worried about the volatility of stock markets?
- Are you worried about your safety of Funds?
Then how about choosing a bond for your retirement fund?
With low-interest rates in the market, it has become difficult for senior citizens with a limited corpus to make ends meet. The situation is especially challenging for retirees solely dependent on interest income from FDs and other fixed-income assets. Retirement is the reality of life. If you wish to enjoy your retirement, it is necessary for you to plan your retirement. The early you start investing, the maximum wealth you can create. RBI Floating Rate Bonds (FRB) do not have a fixed rate of interest and hence it may not suit the need of a senior citizen. Generally, senior citizens look for an investment option that offers better returns, income that is stable and preferably periodic.
Therefore, time and again, investment advisors have cautioned against putting all eggs in one basket. In financial lingo, only a well-diversified portfolio can help an investor tide over a low-interest rate scenario.
Senior citizens do not have the financial space to take undue risks. Hence, instruments that are safe, reliable, and offer attractive returns are the best for retirement planning. Bonds are fixed-income instruments that pay regular interest payments and redeem the principal on maturity. The current economic and market scenario has caused the bond yields to rise, thus, making them more attractive for inclusion in a retirement portfolio. Bonds is one of the best instruments fulfilling the need of every investor in the age group. But RBI Floating Rate Bonds (FRB) do not fit in the kitty because of the fluctuating coupon rate.
There are several types of bonds available for investment by senior citizens. RBI Floating Rate Savings Bond is one such bond that offers attractive returns with utmost security.
10 Key Features of RBI bonds
- 1. The RBI floating rate bonds are issued by the Reserve Bank of India and are available for retail investor consist of Indian citizens and HUF.
- 2. RBI bonds require a minimum investment of Rs 1000 and thereafter in multiples of Rs 1000. There is no cap on the maximum investment amount.
- 3. These bonds are 100 percent risk-free since they have the RBI’s commitment attached to them. Hence, retirees enjoy guaranteed interest and principal payments.
- 4. Interest rates on these bonds are paid on a semi-annual basis. Interest payments are payable in January and July of each year.
- 5. A floating rate of interest is applicable on RBI bonds, hence, they are also known as RBI floating rate bonds. The interest rate is updated every six months by the RBI.
- 6. The current interest rate is at 7.15 percent. The rate will be revised next in June of this year and thereafter in January of 2023.
- 7. Their interest rate is linked to the NSC- National Savings Certificate issued by Indian Post Offices and is 0.35 percentage points above the NSC rate.
- 8. The one of the negative point is that you are stuck with these bonds for seven years as these bonds are non-tradable and non-transferable and cannot be pledged with banks.
- 9. The bond can be held by an individual or on a joint basis. The individual holder can make a nomination.
- 10. The maturity is seven years. But a premature withdrawal option is available for senior citizens. However, the lock-in period differs as per the age category as follows:
The minimum lock-in period for investors between-
- 60 to 70 years of age is - six years.
- 70 to 80 Years of age is - five years.
- Above 80 years of age is - four years.
**In the case of joint bondholders, any of the holders shall fulfil these conditions for a premature withdrawal.
10 Key Features of RBI Bonds in India