One key to enduring financial challenges in retirement is understanding and leveraging government benefits, but just 3% of women take Social Security at an optimal time, according to the 2014 Social Security study by Nationwide Financial.

Women who don’t work with a financial adviser are nearly three times as likely than those who do work with an adviser to say their Social Security payment was less or much less than expected (37% vs. 13%). But only 33% of women work with a financial adviser.

“Women who work with an adviser are more likely to receive good advice on optimizing Social Security,” said Shawn Britt, director of advanced consulting for Nationwide. “If you have the ability to sacrifice a little for a few years, it is worth it [to delay Social Security]. Maximizing benefits will result in less chance of outliving other income sources and reduce the chance of not being able to maintain your lifestyle.”

More than four in five women elect to take their Social Security early, which provides immediate income, but locks in a lower payment for life, according Nationwide’s study. Many of those retirees say financial problems have taken the shine off what are supposed to be their golden years.

Social Security can represent up to 40% of the total income Americans receive throughout retirement. However, according to the Nationwide Retirement Institute, only 15% of women waited until their full retirement age and only 3% took it late. What’s left on the table? A potential hundreds of thousands of dollars of retirement income for women who don’t maximize their Social Security benefits, Nationwide says.  

According to Britt, women take Social Security early for a range of reasons. “Some mistakenly believe taking it earlier will result in more money over the long run, while others may have been forced into retirement early and need the money,” Britt says.

Women who took their benefit early report an average monthly payment of $1,025. Those who collected it at their full retirement age have an average $1,270 monthly payment. Of the 471 women surveyed by Harris Poll on behalf of Nationwide, only 10 delayed collecting their benefit until 70. They report an average monthly payment of $1,630 (or 59% more than if they had taken it early).  

Social Security Options

“Many people are not aware of the different options available for taking Social Security income. For example, married women might think about having their husband file and suspend, which will still allow the wife to collect spousal benefits,” Britt says. “The husband will then wait to age 70 to take his. That way, if he dies, she ends up with a much higher payment as a widow.”

“Too many spouses think they can’t do this because they still work,” Britt says, calling this strategy a huge mistake, and one that can’t be corrected later. Once the money is gone, it is gone. 

Filing early also makes sense for women in poor health who don’t expect to live long. But frequently, the decision is tied to an incorrect expectation about longevity or fear of Social Security running out of money.

“Many people file early because they think, once I am in the system they can’t kick me out,” Britt says. “Others miscalculate how long they have until they break even. Many think it’s 85, but for many people it is around 80.”

Women’s average life expectancy is 86, with one in four reaching 92. That’s a long time to rely on savings, so maximizing sustainable retirement income is crucial.

In the survey of 471 women aged 50 or older who are either already retired or plan to retire in the next 10 years, only 29% say life is better than before retirement and 28% say life is worse. For those who say it’s worse, most blame it on lack of income in retirement and higher-than-expected cost of living expenses.

Since Social Security benefits are based on average earnings over the best 35 years of a career, women are often penalized for leaving the workforce to raise children or care for a parent.

“Some women have to retire early to care for an elderly parent who has no long-term care coverage,” Britt says. “Women caregivers are two-and-a-half times more likely to end up in poverty and five times more likely to depend primarily on Social Security for income.”

Having children and being a caregiver can cost women $565,000 in lifetime earnings; plus $25,400 in Social Security benefits and $67,000 in pension benefits, Britt says. More than 2.6 million women over the age of 65 lived in poverty in 2012, according to an analysis from the National Women’s Law Center.

The 2014 Social Security Study was conducted online in the U.S. by Harris Poll on behalf of Nationwide Financial between February 27 and March 4, 2014. Results were weighted to the U.S. general population of adults by race/ethnicity, education and region.