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The biggest Social Security mistake women make

Is 62 too young to claim for women to claim Social Security?

That is the age at which both women and men are allowed to claim, and sure enough, 40.8 percent of the women who were newly awarded Social Security retirement benefits in 2014 were aged 62. Some 65 percent were below their full retirement age, typically 66. And just 2.8 percent of the women were 70 or older, the age at which they receive their maximum Social Security retirement benefits, according to Social Security Administration data.

Often, both women and men reflexively claim Social Security when they retire. "People don't realize the options out there. They think, 'Oh, I retired, I need to file for Social Security,' " said Shawn Britt, director of the advanced consulting group for Nationwide Insurance.

And women retire at an average age of 62, a figure that has barely budged in a decade, according to a study by the Center for Retirement Research at Boston College.

"Earlier drivers of working longer are no longer having a substantial impact," the study concluded.

Unfortunately, that creates a major problem for older women. The Social Security Administration reduces benefits for people who claim before their full retirement age, so by filing when she is first eligible, a woman is setting herself up for a Social Security benefit reduced by as much as 30 percent for the rest of her life.

It would be one thing if women generally had other significant sources of income in retirement. But according to Britt, women are five times as likely as men to live only on Social Security.

Women who are counting on spousal benefits from Social Security also see their payments diminished if they file before full retirement age. At full retirement age, a woman would be eligible for either her own full benefit or half of her spouse's, whichever is larger. But if she files at 62, she would only be eligible for her reduced benefit or as little as 32.5 percent of her partner's.

Their early claiming of benefits may be one reason why nearly 2.9 million women over 65 live in poverty, more than double the 1.3 million men in poverty, according to the National Women's Law Center. (Not only do men tend to earn more over their lifetimes, they also retire at age 64, on average, the Center for Retirement Research found.)

But there is an easy way for women to boost their income in later life. A woman who holds off on collecting Social Security after her full retirement age will receive delayed retirement credits that will boost her benefit as much as 8 percent for every year she waits until age 70. In other words, a woman whose full retirement age is 66 would receive a benefit reduced by as much as 30 percent if she retired at 62, but if she waited until age 70, it could increased by as much as 32 percent.

All in all, delaying a Social Security claim from age 62 to age 70 can increase the value of the benefit by as much as 76 percent, according to research by David Laster and Anil Suri of Merrill Lynch.

"For a retiree with pressing financial needs or a short life expectancy, it may be best to claim benefits as soon as possible. But for many others, current research suggests that waiting to claim Social Security can substantially increase expected lifetime benefits and reduce the risk of outliving their wealth," they wrote.

That is particularly true in today's low interest rate environment. The "return" on waiting to claim Social Security is well above the yield on a low-risk asset like a 10-year Treasury bond, for example.

People may also believe that if they hold off on receiving Social Security income until 70, the cost of delaying will outweigh the higher income they start receiving at age 70 for years, perhaps until they reach 85 or 90, Britt said. But in reality, she said, the break-even point is closer to age 80. That is well below the life expectancy of age 86.6 that the Social Security Administration calculates for women turning 65 now.

In addition to delaying their initial Social Security claims, women have other options for boosting their Social Security income. Joan Entmacher, vice president for family economic security at the National Women's Law Center, pointed out that married women with higher earning spouses can have the spouses file for Social Security at full retirement age and suspend, or defer, their own receipt of benefits.

The woman can then begin claiming a spousal benefit but continue working, allowing her own Social Security benefit to grow until she reaches age 70. The spouse's benefit will also continue growing until age 70. If they both claim benefits at that point, they maximize their Social Security income.

"At 70, you've got a substantially higher benefit that will continue for the rest of your life," she said.

Britt pointed out that women who have been divorced after at least 10 years of marriage may have another way to boost their Social Security benefit: by using their ex-spouse's benefit.

"I can't tell you how many divorced women don't realize they may be able to collect off their ex-husband's Social Security," Britt said. "The Social Security office can even tell them what the amount is. They don't even have to go to him." Women divorced after 10 or more years are eligible for a benefit equal to half of the ex-spouse's, so if that exceeds what she stands to receive on her own, she can claim that.

Social Security officials are now allowed to advise beneficiaries on the best strategy for claiming benefits, but a financial advisor can help, too. For women who do not have advisors, local libraries sometimes offer workshops and seminars. AARP also provides a Social Security benefits calculator that can help you decide how to claim.

Anyone can benefit from sorting out how to claim Social Security, but women will find it especially valuable, Britt said. "Learning about Social Security is even more important for women than men because they live longer," she said, noting that for women who are 65 today, one in four will reach 90. "A woman's biggest concern is outliving her income sources," she said.

This is the second part of a week-long CNBC.com series on the state of Social Security on its 80th anniversary.