What asset allocation would you suggested for a client who retired at 65 and had about $1.5 million in assets? Two well-known portfolio managers answered that question today before an audience of financial advisors.

Margaret Patel, a managing director and senior portfolio manager for Wells Capital Management, and Dan Fuss, vice chairman of Loomis Sayles, gave their suggestions during an asset allocation presentation before more than 300 financial advisors at the 4th Annual Financial Advisor/Private Wealth Retirement Symposium at The Peabody Orlando hotel and conference center in Orlando, Fla. Evan Simonoff, editorial director of Financial Advisor and Private Wealth magazines, moderated the panel.

"I would say because I think equities are the best asset class, total return wise, ... that they should be 75 percent to 80 percent in common stocks because of the prospect they'll increase," Patel said. "Then another 25 percent in high-yield bonds, where at least you get the extra income."

Although many observers think the U.S. bond market is overvalued, Patel said she doesn't think there's much principal risk in high yield over the next five or six years. It's true that yields are low and prices high, but the risk of default is very low, only 2 percent to 3 percent, she says. Once one filters out the worst 20 percent of triple C high-yield bonds, the yields on the remaining 80 percent are about 6 percent, which suggest the market doesn't anticipate much default risk, Patel said.

"After the 10 percent-plus defaults in 2008 and 2009, the companies that were able to come to the high-yield market are better quality than we have ever seen, number one, and number two, you can't find any sector that's abused its right to come to the high-yield market," she said. Also, the usual companies for future bankruptcies are ones that were taken private in huge leveraged buyouts or bought by private equity firms, and almost none of those transactions have happened recently, Patel added.

Fuss, however, was more hestitant with such a high allocation to equities or high-yield bonds.

"I am not as optimistic on high yield as a broad spectrem," Fuss said, who says interest rates, which are just starting to move up, are likely to keep rising and that will cause problems for high-yield bonds.

"I like the idea of stocks, but being very selective to companies that can realistically boost their dividends," said Fuss, who added he probably would recommend a smaller percentage than 75 percent. In addition to equities, he likes certain kinds of real estate for longer-term investing.

Still, he stressed, his recommendations to a 65-year-old retiring client would depend a lot on whether he or she lives in a high-cost area. "If they are in downtown New York City, they are going to have to pray the city pays its bills and put some of their money into New York munis. ... And if they live in Boston or New York City -- someplace like that -- I'd say keep your job. Keep that income stream going and don't tap Social Security until you have to."

No matter how much the 65-year-old client had in stocks and bonds, Fuss said, it would be important that he or she not have to use principal."I would not want to be in the position of having to liquidate," he said.

Why? Because even though children grow up, parents who can afford it often continue paying their children's college loans or some of their living expenses, especially if the kids return home to live for awhile. "The parents national bank never really closes its doors," he quipped.