A lot of people dream of retiring early, and many Americans actually do it. Today, about half the workers in the U.S. take their retirement at 62, and a whopping 70 percent now start collecting Social Security benefits before their full retirement age. Should you plan to run with the pack or buck conventional wisdom?

For Social Security purposes, your full retirement age is the point at which you're eligible to collect 100 percent of your monthly benefit. If you were born in 1943 or after, that's age 66 to 67, depending on your year of birth. You can collect reduced benefits--as much as 30 percent less than full benefits--at age 62. You can also opt to retire later, up to age 70, and collect as much as 32 percent more than full benefits.

So how do you decide which is best--early, on-time, or late retirement? Ordinarily we take such questions into the Money Lab to find the answer for you. This time you'll need to do much of the work yourself because the factors that you have to consider depend on your particular circumstances. The discussion that follows will help guide you through it.


How long do you expect to live?

The decision to retire early largely boils down to a wager on how many years of retirement lie ahead for you. To get the most in total Social Security benefits, you need to guesstimate your longevity as accurately as possible. The younger the age at which you realistically expect you'll die, the more you should consider collecting your benefits early. Conversely, the farther off you anticipate your date of departure, the longer you should forestall collecting--up to age 70, when the extra payout credit for delaying your benefits maxes out.

Take the hypothetical case of Jane, an employee born in October 1946 (see "The benefits of waiting"). If she expects to die before her normal retirement age of 66, she would be wise to start collecting as soon as she can. If she waits until 66, she may never collect a dime. On the other hand, if Jane expects to live to 90 or beyond, she should wait until age 70 to start collecting. That's because 20 years of the $35,340 in annual benefits she'd get by waiting adds up to a significantly greater total than 28 years of the $19,320 she'd get by retiring at 62. That's $709,745 vs. $542,570, in constant 2007 dollars.

Another way to look at it is in terms of Jane's break-even age. That's that point at which a retiree will collect just as much whether he or she retires early or later. If you live past the break-even age, you're better off having retired later. In Jane's case, that age is 79 years and 6 months.

Of course, it's impossible to know exactly when you'll die, but you can estimate your life expectancy by assessing how healthy you are today. Factors that affect longevity include your lifestyle (diet, exercise, and habits such as smoking, drinking, and aggressive driving), marital status (married people tend to live longer), and your family's heath history.

Online calculators like the one at www.choosetosave.org, a Web site developed by the Employee Benefit Research Institute and the American Savings Education Council, can help you forecast your life expectancy. Social Security's Web site (www.ssa.gov) also has calculators that help you estimate your benefits and determine whether early, on-time, or late retirement is best for you.


How much income will you have?

If your retirement income from sources other than Social Security is sufficient to live on, you might want to put off collecting your benefits until full retirement age or beyond, assuming you expect to live to a ripe old age. That would preserve a higher benefit for your later years, when you might face increased health-care costs. Delaying retirement until 70 is especially valuable for married men who earned significantly more than their wives over the years. Typically, delaying retirement will also beef up benefits for their widows, who are likely to outlive their husbands, possibly by many years, notes Andrew Biggs, deputy commissioner at the Social Security Administration.


Will you continue working?

If you plan to continue working after you retire, and especially if you must work to make ends meet, you'll be penalized for taking Social Security at 62. From 62 to full retirement age, you'll have to give back a substantial part of your benefits if you earn more than $12,960 a year. For every $2 of earnings beyond that, Social Security will reduce your benefits by $1. In the year in which you will hit your full retirement age, a different formula applies: Earn more than $34,440 and you lose $1 in benefits for every $3 you earn. If you're a high earner, you could end up losing your entire benefit. If that happens, however, you'll get a step up in your benefit when you reach full retirement age, and the givebacks end for good at that time.

At any age, if income from all sources--including 401(k) withdrawals, pensions, wages, tax-exempt bond interest, and half your Social Security--exceeds $25,000 for singles or $32,000 for joint filers, 50 to 85 percent of your benefits will be subject to income tax.


Will social security be there for you?

Your final consideration in weighing when to collect is a wild card, but it might turn out to be the most important. If you believe the Social Security system is financially shaky, it might be wise to take your benefits early--while the gettin's still good.

Here's the problem: In the next year, the oldest of the baby boomers will become eligible for early benefits, with millions more to follow. By 2017, the Social Security Trust Fund will pay out more in benefits than the FICA taxes it takes in, according to the 2007 trustees' report. By 2041, the trust fund's reserves are projected to run out completely. The Government Accountability Office says that Congress might have to cut all federal spending by 60 percent or double taxes to balance the budget in 2040 and pay Social Security benefits. Another option is to cut Social Security and Medicare benefits.

We're not making any predictions here, but it's possible that you won't get as much from Social Security as you've been told you'll get. Meanwhile, withdrawals from your tax-deferred savings and other income you're relying on in retirement might be taxed at a substantially higher rate.