Q: My wife is 65 and I am 66. We just received $90,000 from the sale of a
second home. Which is a wiser choice: to pay down our primary residence mortgage with a balance of $136,000, or invest it in our Vanguard accounts. The mortgage has an interest rate of 2.65 percent.

Second question - we have some money invested with Morgan Stanley, about $145,000. It has higher fees than Vanguard. Should we combine everything with Vanguard? —V.G. by email

B. Paying down your mortgage will reduce what you pay in interest over the life of the mortgage, but it won’t reduce the monthly cost of your mortgage unless the mortgage is paid off. So what you do will depend on how much income and other money you have. If your other Vanguard accounts have at least as much in them as you have at Morgan Stanley, you would benefit by transferring the Morgan Stanley account to Vanguard and paying off the remaining $46,000 of the mortgage.

This will (1) eliminate the mortgage and its monthly payment and (2) leave you with a single consolidated account with an additional $99,000 in it. Your life will be simpler. The only thing to deter you from doing this is having some large pending expenses or other debt.

Q. It is difficult to find detailed and accurate information on this specific question:

  • If I delay taking Social Security until age 70 I would receive amount A per month.
  • If I start Social Security before age 66 I would get amount B per month.
  • If I start before age 66 and get B dollars per month, during periods when I am working the amount I receive will be below B per month. However, that also increases the amount to B + X per month during the time when I am not working.

The question is: How is X calculated? How does taking early Social Security and having periods of work affect benefits as compared to delaying until age 70?

If one starts Social Security early and then has periods of work, can the
future monthly benefit amount B + X ever approach or exceed A? Or is
there a penalty such that one cannot approach amount A?

I cannot find anyone with the answer to this. The city of Seattle senior citizen's resource office does not know and with all of the budget cuts at the Social Security administration, they can't find anyone at the SSA office who knows. I know someone whose wife is a lawyer with the SSA and she doesn't know. There is nothing on the AARP website explaining this. —L.S., Seattle, Washington

A. Posing something as an algebra problem isn’t the best way to get an answer from Social Security. A lot of capable people work at Social Security, but they are trained to respond to practical, direct questions about specific circumstances. Then they use their office computers to calculate specific benefit figures.

Between age 62 and full retirement age (currently 66) wage income over certain amounts will work to reduce your benefit during the period you are working. You may also have to pay income taxes on the benefit. So there isn’t a lot of incentive to take benefits early and keep working.

Between age 62 and full retirement age, deferral of benefits works to increase your eventual benefit by nearly 8 percent a year. After full retirement age, deferral of benefits works to increase your benefit by exactly 8 percent a year. This is a high rate of increase. That’s why the deferral of benefits has received a massive amount of press coverage in recent years.

Taking benefits at age 62 and doing intermittent work until age 70 is unlikely to increase your benefit very much. Your ultimate benefit is based on your highest 35 years of earnings. So if you have already worked 35 years, your benefit will only increase if a new year with higher earnings displaces an earlier year with lower earnings. That isn’t likely to happen with intermittent earnings or part-time jobs.

Even if your earnings record is incomplete and an additional year of intermittent labor can replace a blank year, the benefit gain will be less than the gain from deferring the same year. Basically, additional work time is a “can’t get there from here” problem.