2026 Labor Insurance Pension System New Policy! The retirement age is raised to 65 years old. How to receive the most cost-effective pension?

As Taiwan officially enters a super-aged society, the financial sustainability of the labor pension fund has become a national economic issue. One of the most significant reforms is the full increase of the statutory retirement age for the Old Age Pension under Labor Insurance to 65 years old by 2026. This article will analyze the new withdrawal regulations in depth and, from a financial actuarial perspective, explore the break-even point between “early” and “delayed” retirement. At the same time, we will clarify the fundamental differences between the Labor Insurance Pension and the New Labor Retirement System, helping readers build a more robust dual-layer retirement security system in an environment of inflation and longevity risks.

The statutory retirement age for the Labor Insurance Old Age Pension is officially raised to 65

According to the regulations of the “Labor Insurance Act,” in response to aging trends and to ease the financial pressure on the fund, the statutory retirement age for the Old Age Pension adopts a gradual increase mechanism. Since 2018 (民國 107 年), the retirement age has increased by one year every two years, and from 2026 (民國 115 年), it will be officially adjusted to 65. This means that workers born in 民國 51 年 or later will have a fixed full retirement age of 65. This systemic change is not an abrupt event but part of a long-term policy trajectory. Workers must recognize that “delayed retirement” has become an established legal fact. The era of being able to receive full benefits at age 60 has officially ended, and individuals need to reassess their retirement savings accumulation timeline and career planning to adapt to the new legal retirement standard.

How much is the Labor Insurance Old Age Pension? How to withdraw it most cost-effectively

Under the current system, to claim the Labor Insurance Old Age Pension, one must be at least 65 years old with at least 15 years of insurance contribution. The pension is calculated based on the “average monthly insured salary during the highest 60 months of contribution” and is paid out using the better of the following two methods:

Average monthly insured salary × years of contribution × 0.775% + 3,000 NT dollars

Average monthly insured salary × years of contribution × 1.55%

The Labor Insurance Bureau also provides an online calculator. For example, with the maximum insured salary of 45,800 NT dollars and 40 years of contribution, the monthly payout would be approximately 28,396 NT dollars.

How to maximize the benefits when claiming the Labor Insurance Old Age Pension

Regarding the adjustment of the statutory age, the Labor Insurance system retains flexible mechanisms of “deferment” and “reduction.” Workers can choose to claim up to 5 years earlier or later. If choosing “early retirement” (reduced pension), each year claimed early results in a 4% reduction in benefits, up to a maximum of 20%. Conversely, delaying retirement increases benefits by 4% per year, up to a maximum of 20%.

From an actuarial perspective, early retirement is suitable for those in poor health, with shorter expected lifespans, or with urgent debt needs. While it offers the “time value” of cash flow by allowing early access to funds, it also carries the risk of reduced total payout due to longer lifespans. Typical actuarial models show that if a worker expects to live beyond 80, delaying or normal retirement generally yields higher total benefits. Therefore, the key decision depends on personal health expectations and marginal benefits of current funds.

The breakeven age is 83

Starting to claim at age 60, receiving 80% of the benefit with a 20% reduction, results in receiving more money over 5 years compared to waiting until age 65. The breakeven point is approximately age 83. If your family has a history of longevity and you believe you will live beyond 83, delaying is more advantageous; if your health is average, early retirement is usually the better strategy.

Time value and inflation

Another factor to consider is inflation. The purchasing power of 20,000 NT dollars today is significantly higher than that of 20,000 NT dollars five years from now. Although early retirement benefits are discounted, if you can invest the funds in stable assets with an annual return exceeding 4%, the combined effect of “early withdrawal + investment” can often outperform the benefits of delaying retirement solely through pension increases.

What are the differences between “Labor Insurance Pension” and the “New Labor Retirement System”?

Many people often confuse the differences between the “Labor Insurance Pension” and the “New Labor Retirement System.” The “Labor Insurance Pension” is a social insurance program based on a “defined benefit” scheme. Its funds come from a collective fund pool, featuring risk sharing and inflation resistance mechanisms, providing lifelong保障 for workers to receive benefits until old age.

In contrast, the “New Labor Retirement System” is a “defined contribution” scheme. Employers contribute 6% of the employee’s salary monthly into a personal account, which is the worker’s asset and can be transferred across jobs. Individuals can also choose to contribute 6% of their salary monthly into their retirement account for tax benefits, with the contribution amount not included in personal income tax declarations.

Workers aged 60 or above with at least 15 years of service can choose to withdraw a lump sum of their personal retirement account principal and accumulated earnings or, based on actuarial calculations such as life expectancy and interest rates, receive monthly retirement benefits paid quarterly until the account balance is exhausted. In short, the Labor Insurance is mutual aid insurance, while the Labor Retirement is forced savings. Their complementary nature forms the dual pillars of Taiwan’s labor retirement system.

This article “2026 Labor Insurance Pension New System Launch! Retirement Age Raised to 65, How to Claim Benefits Most Cost-Effectively?” first appeared on Lian News ABMedia.