Lump-Sum or Monthly Payout: 57-Year-Old Worker Stunned by Calculation—Choosing This Option Yields NT$1.86 Million More

Many workers approaching retirement face a difficult decision between taking their labor insurance benefits as a lump sum or receiving them monthly. A 57-year-old male worker with 35 years of labor insurance coverage, having consistently contributed based on the minimum wage of NT$28,590, initially considered withdrawing his benefits in a lump sum at age 57. He feared that even if he continued contributing until age 60 and applied for monthly payments, early withdrawal penalties would significantly reduce his monthly amount. However, expert calculations revealed a staggering difference of up to NT$1.86 million between the two options.

If he chooses a lump-sum payout at age 57, the benefit is calculated based on the average monthly insured salary over the last three years before withdrawal, multiplied by a benefit multiplier. The formula grants one multiplier for each of the first 15 years and two multipliers for each subsequent year, capped at 45 multipliers before age 60. With an average insured salary of NT$28,590, the lump-sum amount would be NT$28,590 × 45 = NT$1,286,550.

Alternatively, if he continues contributing until age 60, his total contribution period would extend to 38 years. For those born after 1962, the standard retirement age for labor pension benefits is 65. Early withdrawal starting at age 60 incurs a 4% reduction per year, totaling a 20% deduction for five years of early withdrawal. The monthly pension is calculated as: average monthly insured salary × years of contribution × 1.55%, then reduced by 20%. Thus, NT$28,590 × 38 × 1.55% × (1 - 20%) = NT$13,472 per month.

To determine when monthly payments surpass the lump sum, divide NT$1,286,550 by NT$13,472, resulting in approximately 96 months, or 8 years. This means that if he starts receiving monthly payments at age 60, he will break even by age 68. Assuming an average life expectancy of 80, he would receive an additional 12 years of payments beyond the breakeven point. Over these 12 years, he would collect NT$13,472 × 12 months × 12 years = NT$1,939,968. Even after deducting the three years of additional insurance premiums (estimated at NT$2,000 per month, totaling NT$72,000), the net gain from monthly payments exceeds the lump sum by NT$1,867,968. The data clearly shows that choosing monthly payments is significantly more advantageous for those expected to live beyond 68.