By Scott Burns

Q. I am 62 and will likely retire at age 65. I have $336,000 in a 401(k) account and a house that is worth around $450,000. We owe about $217,000 on the mortgage. We have no other debt. I am also one of the fortunate workers who will have a pension. I am fully vested in the pension and it has survivor benefits.

One of the options for the pension is to take a lump sum distribution at 65. It would be about $515,000. I am considering taking the lump sum and paying the house off at retirement. My plan projects that I will have $482,000 in the 401(k) by then, but who knows about that. I can see a possibility of having the house paid off and somewhere between $400,000 and $500,000 in the 401(k) and around $90,000 in cash.

My wife is 52 and we make $100,000 to $125,000 a year. Men in my family don't live a long time. My father, grandfather, and blood uncle did not live past 74.

Should I take the lump sum distribution? —G.S., by email

A. Given the investment environment, taking the pension is probably a better choice. One reason is that you can view the fixed pension benefit as your means for making payments on the mortgage, which are also fixed. You’ll have the option of refinancing to a lower interest rate if rates continue to decline. Basically, your mortgage is a kind of inflation hedge. (No, I would not recommend this for people who don’t have pensions to cover the mortgage payment.)

Since the pension will have survivor benefits, it will also make life easier for your spouse since she will have a steady income from both a pension and Social Security. That means she won’t have to worry as much about investments.

Finally, paying off your mortgage with a single check isn’t without tax consequences. If you took all that money from your pension assets every dime of it would be taxable income in a single year. That’s not a good move.

Q. My wife and I (both 69) have 100 percent of our investment funds in well diversified equities. We own equities that represent U.S. large and small caps as well as international equities. Several years ago a well-known brokerage firm looked at the portfolio and labeled it "aggressive." They recommended we begin to move money from our equity holdings to fixed income investments.

Later I retired and started receiving income from two pensions. We also receive Social Security benefits. Now it seems to us that we have a substantial part (about 40 percent) of our income in the "fixed" category. In this income model, we realize pension amounts are truly fixed, but the other income sources (Social Security and equities) can protect us from future inflation. We have never sold equities to pay for our expenses. We lived on the dividends, which are less than 4 percent, and the "fixed income" sources mentioned above.

Can't we look at pensions and Social Security as the fixed investment part of our total financial portfolio to achieve what the financial industry guidelines say about balancing between equities and fixed investment? By the way, we don't see any reason to figure the value of our Social Security incomes or the value of the pensions as investments - they cannot be sold. —R. J., The Hills, TX

A. The real issue here isn’t what you should have in stocks or bonds. It isn’t whether you can count your pensions and Social Security income as assets, either. Your choice between stocks and bonds is about the degree of vulnerability your future income may have. You could invest 100 percent of your financial assets in TIPS and be assured of inflation guaranteed spending for the rest of your life. You could also invest 100 percent of your financial assets in stocks and, perhaps, suffer a devastating loss in market value followed by a massive drop in dividend income.

If your pensions and Social Security account for 80 percent of your income and spending, you can afford a relatively aggressive commitment to equities. You can take the risk because you won’t lose more than 20 percent of your income.

If pensions and Social Security account for only 20 percent of your income and spending, on the other hand, it is a different matter.

Your decision needs to be about how much of your income you are willing to have at risk. You appear to have about 60 percent of your income at risk. That’s pretty risky.