Let me share my view.
Commutation is good. Why?
1. Gives a lumpsum amount. @7% or so. It boosts your financial security and confidence. Yes, wise usage is certainly required.
2. Opportunity to encash on good investment preposition like Equity, Mutual Funds, Real Estate esp undervalued deals.
3. Education of children as a value add. Normal edn loans are @11% plus today. One of the best investment you can make towards a DESERVING ward. IDFC offers @9.5% the best in market.
4. You need lumpsum today. If you already have it then you may not find commutation as a good choice. And regular pension in hand to spend more is good.
5. You need money today when you can run, climb, eat, drive and get best out of life. Baad me to wese hi ek roti par aa jaoge. 1BHK Ghar ya park me poora din spend karoge. Gaadi bhi pata nahi chuhe kutar jaayen. So live life today.
6. Take your commutation. Invest wisely in equities or wherever you are comfortable. Try to generate 15% plus returns and go on vacation every year to a good place. Or do some charity etc.
Personally it was a good call for me to take commutation. While I didn't make much investments and may have lost 3 to 5% per annum say about 2 lacs at max at 40 lacs. But it helped me buy a house at a good price and the capacity to pay immediately helped good negotiations.
Secondly, I could assure my children of best education globally if they can prove themselves worthy of the same. And they were sure of that support will come for sure. So we must prove our worth. At least you could induce a forward looking dream in them.
Thirdly, if you are planning an entrepreneurship, then you have the requisite seed capital or initial investment. You can start immediately if you have the capability.
There are many other reasons I can give you. Financial Mathematics is good to understand. But more than that the psychology of money and what it can be traded for is extremely critical.
Should you take that 50 plus lacs @7% or be happy with additional pension is purely an individual take. But for some of us who may not have very great financial bandwidth, this is a wonderful facility and must be used.
But be intelligent and learn financial planning and discipline.
I don't want to say much at this stage as I have no success story to tell or sell.
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But there is certainly a way to make good money and enjoy it. I am a beginner today, thanks to friends and coursemates I am learning it. This has given me the confidence that I will make more money than I lost by taking commutation.
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