Retirement planning is one of the most critical part of financial planning that one should not ignore. It's common for us to postpone this important decision for the latter years of our career in the hope that we will earn more money and save more money to make up for the years we lost.

However, for people who do start planning for their retirement from the start of their career, they often begin by choosing investment vehicles having high risk, typically stocks. In addition, most people prefer to keep all their eggs in one basket, which is a major mistake especially when you are planning to save for your retirement.

When it comes to protecting your investment corpus, bonds offer the best protection. Even as stocks are often considered as the growth engine of a corpus, bonds help you to preserve your wealth. The risk of wealth erosion in the face of rising costs of living, which may become enormous 40 years from now - at the time of retirement, is something that needs to be considered from the start.

This does not mean that bonds are not immune to wealth erosion, but historical trend indicates that bonds generally hold their ground and are an effective way to stablise ones portfolio.

Infact, many financial advisors also suggest senior citizens to use bonds not just as a means to generate a steady stream of income but also to rebalance their portfolio during stock market volatility.

Now that you know the important reason why bonds need to be allocated in your retirement planning, a major question that you are probably wondering is to invest in which kind of bonds?

Which Bonds To Pick?

If you are planning to invest in bonds to build your retirement corpus, the ideal bonds to include in your portfolio are high-grade bonds.

What are high-quality bonds?

It is important not to get confused between high-grade and high-yield. High-grade bonds are those which are believed to have a lower risk of default and that is indicated by high ratings by credit rating agencies.

While every credit rating agency has its own set of ratings, they are usually represented as AAA, AA, A, BBB, and so on - the highest rating being AAA and the lowest being D - indicating that the security borders on defaulting.

Avoid including high-yield bonds also known as junk bonds. These bonds are called high-yield bonds typically due to the high rate of return promised on these bonds, which comes with a higher risk as the chances of the company defaulting is more.

If you are considering to start building your retirement corpus or want to include bonds in your retirement fund, BondsKart platform has a series of curated high-grade bonds that would be the perfect addition to your portfolio.

Retiree investors should also consider the duration of the bond while purchasing. The duration in bond parlance means maturity, i.e. the average time it will take for the bond holding to mature.

Experts advise retirees to invest in short term bonds typically (zero to three years ) or intermediate term (three to seven years) primarily during times of rising inflation as inflation can erode the money-making ability of a bond that has a long maturity period.

But for someone who is not able to track their investments by themselves, it is best for them to invest their money in mutual funds or Exchange Traded Funds that have exposure to bonds.

Investments in such funds which have a significant allocation to bonds are considered a great way to diversify a portfolio. But it is important to see that the allocation of stocks should not be higher because that has a higher chance of wealth erosion.

To build a robust retirement savings corpus, meticulous planning and disciplined execution are imperative. Commencing early, regularly saving and investing, diversifying your investments, and tracking your progress are fundamental steps towards achieving a financially stable retirement. Nonetheless, seeking guidance from a financial advisor before making any investment decisions is crucial to ensure that your retirement plans align with your objectives.