Monthly or Lump Sum Payout for Labor Insurance? With an Average Insured Salary of NT$45,800, Receive NT$21,297 Monthly – Eligibility and Formulas Explained

As Taiwan officially enters a super-aged society, the biggest concern for many workers who have spent most of their lives laboring is whether their post-retirement finances will be sufficient. Numerous individuals have paid insurance premiums for decades, only to realize near retirement that they still don't fully understand the system, and cannot clearly distinguish between 'Labor Insurance Old-Age Benefits' and 'Labor Retirement Funds.'

For most employees covered under the new Labor Retirement Scheme, the two common sources of post-retirement income are the 'Labor Retirement Fund' and the 'Labor Insurance Old-Age Benefit.' These belong to different systems and can be claimed separately. The Labor Retirement Fund requires employers, under the Labor Retirement Act, to contribute at least 6% of the employee's monthly wage into a personal account. The account ownership belongs to the employee and will not disappear due to job changes or company closures. The Labor Insurance Old-Age Benefit, on the other hand, is a social insurance jointly funded by workers, employers, and the government, primarily providing basic economic security after retirement. Clarifying the differences between these two funds is essential to accurately estimate post-retirement income.

Why do many people prefer monthly annuity payments? Is a lump sum always less advantageous?

After understanding the system differences, many workers ask: Should the Labor Insurance Old-Age Benefit be received monthly or as a lump sum? However, it must first be clarified that not every worker has the freedom to choose.

Workers with 15 or more years of Labor Insurance coverage, who have reached the statutory retirement age and completed resignation and insurance withdrawal procedures, are generally eligible to claim an old-age annuity. Those with less than 15 years of coverage typically receive a one-time old-age payment upon reaching the statutory age and completing withdrawal. Only workers who had Labor Insurance tenure before January 1, 2009, and meet the conditions under the old system, may choose between the old-age annuity and a 'lump-sum old-age benefit.' Once approved by the Labor Insurance Bureau, this choice cannot be changed.

For eligible workers, the break-even point between cumulative monthly annuity and lump-sum payments varies depending on average monthly insured salary, insurance tenure, lump-sum payment months, and claim timing. Common calculations suggest this break-even point occurs approximately 7 to 8 years after claiming, but this '8-year' benchmark should not be universally applied to all workers.

For those in good health who wish to maintain stable cash flow after retirement, the lifelong monthly disbursement of the old-age annuity reduces the risk of outliving one's savings. Conversely, those with significant medical expenses, debts, or family financial needs—and who qualify for lump-sum payments—can consider the financial flexibility offered by a lump sum, though they must also be cautious about investment losses, fraud, or premature spending.

Is Labor Insurance tenure 15 years or less? How are the two annuity formulas calculated?

Current Labor Insurance old-age benefits are mainly divided into three types. The 'Old-Age Annuity Benefit' applies to those with 15 or more years of insurance tenure who have reached the statutory retirement age. The 'Old-Age Lump-Sum Benefit' primarily applies to workers with less than 15 years of tenure. As for those who had Labor Insurance tenure before January 1, 2009, and meet the old system conditions, the option to 'lump-sum claim old-age benefits' is preserved.

The amount of the old-age annuity is calculated by the Labor Insurance Bureau using two formulas, with the higher amount paid:

Formula 1: Average monthly insured salary × insurance tenure × 0.775% + NT$3,000

Formula 2: Average monthly insured salary × insurance tenure × 1.55%

The 'average monthly insured salary' used for the old-age annuity is calculated as the average of the highest 60 months of insured salary throughout the entire coverage period, not simply the salary from the last three years before retirement. For example, with an average monthly insured salary of NT$45,800 and 30 years of Labor Insurance tenure, the monthly payout under Formula 2 is approximately NT$21,297.

However, for those claiming the pre-2009 'lump-sum old-age benefit' under the old system, the average monthly insured salary is calculated based on the 36 months prior to insurance withdrawal. Therefore, before calculating retirement benefits, it is essential to confirm which type of benefit you are applying for and avoid mixing salary calculation methods from different systems.

Statutory retirement age rises to 65 in 2026—how much is reduced for early retirement?

Starting January 1, 2026, the statutory retirement age for Labor Insurance old-age annuities will be adjusted to 65. According to birth year, workers born in 1962 (Minguo Year 51) or later must generally be 65 years old to claim an unreduced old-age annuity.

The system still allows flexibility for early or delayed claims. Workers with 15 or more years of Labor Insurance tenure may apply for reduced annuities up to 5 years early, with a 4% reduction per year, up to a maximum of 20%. If claiming after the statutory age, the benefit increases by 4% per year delayed, up to a maximum of 20%. Once early or delayed claiming is chosen, the adjustment ratio is fixed and will not be revised or restored later.

Additionally, workers engaged in high-pressure chamber or diving operations defined under the 'Prevention Standards for Abnormal Pressure Hazards,' with at least 15 years of relevant special work tenure, aged 55 or older, and who have completed resignation and insurance withdrawal, may claim old-age annuities under special provisions. Currently, not all hazardous, heavy-duty, or high-risk occupations are eligible; specific job categories and proof requirements defined by the competent authority must be met.