How much can you invest in stocks for a secure retirement?

Q: I think I'm in a unique situation. I'm 75 years old, very healthy and active, married to a woman who is financially independent, have various retirement incomes such as Social Security, a retirement pension and required minimum distributions. The house is paid for, and I actually save $1,000 a month. I have over a million dollars with Vanguard in various index funds and bond funds.

My Vanguard account is 80 percent stocks and 20 percent bonds. Most folks recommend that the majority of my account should be in bonds. I would appreciate hearing your opinion.

— C.M., by email

A: There are many opinions about how your money should be invested in retirement. Unfortunately, each path can be shown as wonderful in some periods, not so good in others. Some urge having 100 percent minus your age in stocks. For you, that would be 25 percent. Recently, others have suggested the reverse — have a rising equity commitment as you age.

A long history of portfolio survival research has shown that the highest probability of having our money last as long as we do occurs when we have 50 to 75 percent committed to a well-diversified stock portfolio. The allocation you choose between those two numbers depends on two things:

The first is your fear of loss, your tolerance for price volatility. If it is low, own less stock, not more.

The second is how vulnerable your basic living standard is to loss. Here's an example. You have income from Social Security and a pension. Some people with both have enough guaranteed income to cover their basic living standard and taxes without touching their investments. These people can afford to take more risk because they have less of their living standard at stake.

On the other hand, the only guaranteed income most people have is from Social Security. If your basic living expenses are greater than your Social Security, what happens to your retirement investments will have a major impact on your standard of living. So invest conservatively.

Q: My 24-year-old son wants to move back to Seattle from San Diego. He wants to buy a condo in three to five years. Seattle home prices rose 11 percent last year. He's been saving $2,000 a month — almost half his salary — in a savings account, earning 1 percent interest.

What is the best way for him to gain the most for his savings, other than certificates of deposit? It's frustrating to be a buyer in Seattle, especially a young person!

— J.C., Seattle

A: As difficult as the Seattle housing market is, there is more good news here than bad news. If your son were trying to return to Seattle from most locations in America, he'd be in for a terrible price shock.

Here's an example: The median U.S. home price, according to the National Association of Realtors, was $240,000 at midyear, but the corresponding prices were $420,000 in Seattle and $590,000 in San Diego. So when your son gets to move, he'll be moving to an area with somewhat lower home prices. He'll also be moving from a state with a high personal income tax to a state with no personal income tax.

Another bit of good news is that his $2,000-a-month savings rate is building his down payment bankroll quickly, so he'll likely have the necessary cash when he moves to buy.

The big questions here: Should he become a homeowner? Can he afford it? If $2,000 a month is half of his salary, then his income is about $50,000. So he'd be looking for a condo or lower-than-median-priced home if he is to qualify for financing. And if he is only 24, he may have more job moves ahead of him. It's good to remember that real estate has been known to go down in value as well as up.

Is there a better savings vehicle than certificates of deposit? No, not without taking significant risk. The reality here is that most of the money in his eventual down payment will be his original savings. It won't be gains from accumulated interest. But the more cash he has in hand, the better prepared he will be for the next market downturn. Cash may not earn anything, but it's remarkable what you can buy with it from people who need it.

• Scott Burns is a principal of the Plano, Texas-based investment firm AssetBuilder Inc., a registered investment adviser. Questions about personal finance and investments may be sent by email to scott@scottburns.com.