The retirement gap
On wages and Taiwan's labor-insurance pension alone, most people won't have enough in retirement; investing has to fill the gap.
In One Sentence
Savings plus Taiwan's Labor Insurance pension usually can't carry you through twenty years of retirement; the difference has to be made up early, through investing. (This applies to Taiwan.)
Why It Matters
Many people assume that with Labor Insurance and some savings, their old age is taken care of. Using official statistics, I ran rough numbers for a median office worker, and at best they barely break even — and that's assuming they never touch their savings for forty years, without counting buying a home, raising children, medical bills or inflation. The sooner you put your money to work for you, the less you'll have to make up later.
One Number
Working 40 years saves about NT$3.52 million; add about NT$4.63 million from 20 years of Labor Insurance pension, and the total is about NT$8.15 million. But spending NT$45,000 a month in retirement takes NT$10.8 million over 20 years (DGBAS, Bureau of Labor Insurance, author's estimate · Chapter I).
In the Book
Chapter I uses official figures to work out this gap. Chapter V reminds you to keep one to two years of living expenses as a buffer after you retire, so you won't have to dump stocks at fire-sale prices in a crash.
Go Further
- Dollar-cost averaging The remedy for the gap: buy broad-market index ETFs automatically every month.
- Pay yourself first Pay yourself first, so you have principal to invest.
- Inflation The calculation leaves out inflation, so the real gap can only be bigger.
- Six stages of financial freedom Retiring without lowering your standard of living is "independence," one of the six stages.