Does it make sense to take early retirement and have reduced Social Security benefits for the long decades of your retirement? Can you come out ahead if you delay retirement and don’t begin collecting Social Security benefits until you reach 70? Bill Hunot, who worked for the Social Security Administration for 27 years and is now a Financial Planning Analyst with Wells Fargo Advisors, spoke in Brownsville on options available in the Social Security system.

In 1935, when the Social Security Act was signed, the average life expectancy was only 65. The program was established as the Old Age, Survivors and Disability insurance. It was not a retirement program. In the midst of the Depression, one goal of the Social Security Act was to give an incentive to the oldest workers to retire and open up jobs for the unemployed.

It is a different world now in so many ways. In 2010 Social Security provided benefits to 44 million retirees. It is estimated that Social Security payments keep 40 percent of elderly Americans out of poverty. That includes people like my grandfather who lost his pension years ago when the company he worked for closed down. It includes people who worked at jobs with no pension plans in the days before IRAs as well as those who had low paying jobs that precluded savings. The monthly Social Security benefit is based on three things. The worker’s earnings and related money paid in through FICA, the number of years worked and the age at which benefits are started. The maximum monthly benefit is currently $2,366.

In 2004, the full-benefit retirement age started inching up from 65 to age 66 for those born before 1955 and to age 67 for those born after 1960. Retirement years are stretching on for decades as life expectancy is extended. That fact is forcing people to consider if they will last as long as their retirement funds … or longer. If a married couple lives to 65, there’s a fifty-fifty chance that one of them will live until 90, Hunot said.

You can significantly increase your monthly Social Security benefits by working past the full retirement age for your age cohort, Hunot said. The Baby Boomers born before 1955, able to retire at 66, are the ones eligible for the greatest boost in a long term benefit increase. Those who delay their retirement for four years until they are 70 will collect 132 percent of their scheduled benefit for the rest of their life. Delaying retirement for one year means a person in this group will receive 108 percent; for two years’ delay the annual benefit reaches 116 percent, and 124 percent for waiting until age 69. (Later groups will never get more than 124 percent.)

On the other hand, anyone who retires four years prior to their full retirement age will collect 75 percent of the benefit for the rest of their lives. Yet the average American retirement age is 62.

So, which is the smarter course? “I am biased to take Social Security as soon as you can get it,” Hunot said. “Of course, it depends on your own individual situation, the factors unique to each of us.”

Read more of this story by Eileen Mattei in the August print edition of Valley Business Report, out now.