1. Commutation of pension should consider the retirement age, the need for the lumpsum money and the risk profile of the individual.
2. In cases of early retirement, commutation is beneficial due to:-
a) tax-free lumpsum for life goals,
b) lesser taxable pension later, and
c) scope of second career income.
3. In cases of regular retirement, commuting benefits depend on:-
a) the need to become debt-free,
b) time left for pending goals, and
c) scope of reinvestment elsewhere.
4. In cases of genuine needs for meeting short-term and medium-term goals, commuting for a tax-free lumpsum amount is ok, though your taxable pension gets reduced.
5. In cases where commutation is done for reinvestment alone, the risk appetite at that age is a very important consideration as the lumpsum amount is deployed for market-linked returns instead of a fixed income.
2. In cases of early retirement, commutation is beneficial due to:-
a) tax-free lumpsum for life goals,
b) lesser taxable pension later, and
c) scope of second career income.
3. In cases of regular retirement, commuting benefits depend on:-
a) the need to become debt-free,
b) time left for pending goals, and
c) scope of reinvestment elsewhere.
4. In cases of genuine needs for meeting short-term and medium-term goals, commuting for a tax-free lumpsum amount is ok, though your taxable pension gets reduced.
5. In cases where commutation is done for reinvestment alone, the risk appetite at that age is a very important consideration as the lumpsum amount is deployed for market-linked returns instead of a fixed income.