How to Maximize Your Pension at Age 60? Retiring Early with a $45,800 Salary Cuts Monthly Payout by $3,975 – Labor Insurance Calculator Explained

“I want to retire early, but I don’t want my monthly income to drop.” This is a common dilemma for many workers planning their Labor Insurance (Laobao) and Labor Retirement Fund (Laotui) benefits. The Labor Insurance Bureau once published a case involving Mr. Tu from Yuanlin, born in 1962 (Minguo Year 51). By 2022 (Minguo 111), he had accumulated 28 years of Labor Insurance coverage and planned to retire at age 60, coordinating both Laotui and Labor Insurance old-age benefits. Since his monthly insured salary had long remained at the maximum tier of $45,800, a friend advised that opting for monthly Labor Insurance old-age annuity payments might be more beneficial in the long run. The issue, however, is that retirement age and pension eligibility age are not the same. The real question is when one can claim benefits and whether early claiming is worthwhile.

Why Can’t Workers Born in 1962 Receive Full Pension at Age 60?

Many people still believe that “once you turn 60, you can receive Labor Insurance old-age annuity.” However, the statutory eligibility age for Labor Insurance old-age annuity has been gradually increasing. Starting in 2026 (Minguo 115), the eligibility age rises to 65. Workers born after 1962 (Minguo 51) must generally reach the full age of 65 to receive the full, non-reduced old-age annuity.

Mr. Tu was born in 1962 (Minguo 51). Although he turned 60 in 2022 (Minguo 111), his statutory eligibility age is 65. Therefore, he must wait until 2027 (Minguo 116), when he turns 65, and meets other conditions—such as having at least 15 years of Labor Insurance coverage and leaving employment with insurance termination—before he can claim the full Labor Insurance old-age annuity.

Can Labor Insurance Old-Age Annuity Be Claimed Early?

Yes, Labor Insurance old-age annuity can be claimed early, but no earlier than five years before the statutory eligibility age. For each year claimed early, the annuity amount is reduced by 4%. Claiming five years early results in a 20% reduction. If the early claim period is less than a full year, the reduction is prorated by the actual number of months.

Once the reduction rate is determined by the Labor Insurance Bureau, it is fixed and will not change. Even after the recipient reaches age 65, the annuity will not revert to the full amount. For workers planning early retirement, this choice will have a long-term impact on their monthly disposable income.

How Much Can You Receive with a $45,800 Insured Salary?

Labor Insurance old-age annuity is calculated using two formulas, and the Labor Insurance Bureau will pay the higher amount:

Formula 1: Average monthly insured salary × Insurance years × 0.775% + $3,000

Formula 2: Average monthly insured salary × Insurance years × 1.55%

The “average monthly insured salary” is calculated based on the average of the highest 60 months of insured salary during the coverage period, not just the salary in the few years before retirement. The current maximum monthly insured salary tier under Labor Insurance is $45,800.

Assuming Mr. Tu retires and terminates coverage at age 60 without adding further Labor Insurance years, and his average monthly insured salary over the highest 60 months is $45,800 with 28 years of coverage, Formula 2 yields a higher result:

$45,800 × 28 × 1.55% = $19,877

Therefore, if Mr. Tu waits until age 65 to claim, he will receive approximately $19,877 per month. Using Formula 1, the amount would be about $12,939. The Labor Insurance Bureau will choose the higher amount from Formula 2. The actual payout will be subject to final approval by the Bureau.

How Much Less Per Month If Claimed at Age 60?

If Mr. Tu claims five years early at age 60, his annuity will be reduced by 20%. The original $19,877 monthly annuity becomes:

$19,877 × 80% = $15,902

In other words, claiming five years early results in approximately $3,975 less per month, and this reduced amount will not be restored when he turns 65. Early claiming provides a fixed income during early retirement but means the monthly annuity will be permanently reduced by 20%.

How Should Labor Insurance Old-Age Annuity and Labor Retirement Fund Be Combined?

Labor Insurance old-age annuity and the new Labor Retirement Fund system are two separate programs. The old-age annuity is a social insurance program that, once qualified, is paid monthly until the recipient’s death. The Labor Retirement Fund, on the other hand, is funded by employer contributions into individual worker accounts, and the retirement payout depends on the accumulated principal and investment returns in the account.

Under current regulations, workers enrolled in the new Labor Retirement Fund system can claim funds from their personal retirement accounts upon reaching age 60. Those with at least 15 years of contributions can choose between a lump-sum payment or monthly pension; those with less than 15 years can only receive a lump sum.

Even after leaving the workforce, workers are not required to immediately claim their Labor Insurance old-age annuity. After retirement, they can assess their personal savings, Labor Retirement Fund balance, health, and household expenses to determine whether to first use their Labor Retirement Fund to cover living costs and delay claiming the old-age annuity.

However, delaying the claim is not always more beneficial. It depends on life expectancy, post-retirement cash needs, whether one continues working and contributing, and other income sources. It’s not enough to simply compare monthly amounts. To check your actual years of coverage, average monthly insured salary, and estimated payout, you can use the Labor Insurance Bureau’s integrated calculator for Labor Insurance old-age benefits and Labor Retirement Fund.