It has been seven years since the start of this bull market for stocks in the U.S. Is it time for investors to adjust the equity allocations in their retirement portfolios?  Many financial advisers say yes. But that is where the consensus seems to end. Some believe that investors should start to reduce the amount of money they have in stocks. Others, however, argue for sustaining the stock allocation. What they do have in common is that they believe it is time to tinker with the models, while weighing different reasons to move the stock needle up or down.  There is no universal prescription for equity allocation, of course. Much depends on a portfolio’s size, an investor’s age and how soon he or she wishes to retire. Expectations for annual stock returns have ratcheted back since the stock market recovery began in 2009, with many financial planners modeling for annual returns in the 4% or 5% range, down from as much as twice that before the 2008-09 recession.  Meanwhile, the reduced outlook for equities still exceeds expected returns for other asset classes. But for many, all of the volatility of late makes the near-term risk/reward proposition for stocks less appealing.  “Returns expectations have ratcheted down, but the expectation of short-term volatility in the market continues,” says Christine Benz, director of personal finance at fund researchers Morningstar Inc. MORN -0.07 %  Other factors affect allocation decisions, too, such as whether an investor’s portfolio has been rebalanced along the way, or whether it has passively wandered into an inappropriate asset mix for the person’s risk tolerance or goals.  Ms. Benz notes than an investor with $10,000 invested in a 50% stock, 50% bond-related portfolio in 2009 would have seen—if the portfolio were left unchecked—a transition to a 70% stock and 30% bond allocation by the end of 2015.  The good news? The investor’s money would have grown substantially. The bad news? So would the risk exposure.  Here is a look at four percentages of stock allocation for an investor to consider, and the types of investors that might want to consider each of the levels.  Who is using this approach: The very rich, those with low required rates of return.  Rich, or “high net worth,” investors have the luxury of turning to a cash-preservation approach earlier than their less-affluent peers, meaning they can afford to protect the assets they have accumulated rather than pursue potentially high returns at the cost of greater risk. These investors might avoid stocks altogether at any age, opting for fixed income or cash.  But the very rich aren’t the only ones who might use a no-stock approach.  John Flavin, a certified financial planner and registered investment adviser with Synergy Financial in Seattle, makes the case that for the nonelite, a no-stock portfolio isn’t inconceivable.  For each client, Mr. Flavin’s firm determines a required rate of return—the return needed for the investor to accumulate the funds needed to live as planned in retirement. For some investors who have saved carefully or who are able to live frugally, the required return can be low, which means the assets used to achieve it don’t have to deliver anything resembling stocklike returns.  “If you don’t need to be in the market, by all means you can hold zero stocks in your portfolio,” Mr. Flavin says.  He says that he works with an 80-year-old couple who have a low required rate of return, 1.5%, and that he has recommended an all-bond portfolio for them. Based on a rate-of-return approach, stocks aren’t necessary for them, he says. Clients who need a 4% return, on the other hand, would likely use 30% to 40% stocks in their portfolio, Mr. Flavin says, and those who need 8% might need to deploy 60% stocks.  Who is using it: Investors with short-term market concerns and those near retirement who want to reduce their risk.  Andrew Sloan, an adviser with Bluegrass Financial Planning in Louisville, Ky., says that for clients within five years of retirement he has been rebalancing portfolios toward a 30% stock and 70% fixed income/cash allocation, rolling back from a 40% stock and 60% cash allocation.  “You still need to take on some risk with equities to beat inflation,” he says. Where clients are transitioning money out of stocks, they’re not choosing cash, but rather shorter-duration bond funds.  Others are going down to 30% in the short term to protect bull-market gains.  “I’ve gone to 70% cash in my personal accounts,” says Tim Shanahan, a certified financial planner and president of Compass Capital in Braintree, Mass., a fee-only adviser. And it is an approach he has advised clients to consider, too.  Mr. Shanahan says that in the second half of 2015 he began advising many clients away from stocks. He says he decided cash was the wisest bet for the foreseeable future, based on his belief that equities are overvalued, that rising interest rates make rebalancing toward fixed-income riskier than before, and that rebalancing into “alternatives” isn’t helpful given that they are ultimately correlated to the broader stock market.  Mr. Shanahan says he advised several clients—most within 15 years of retiring—to move from a typical mix of 60% stocks and 40% fixed income to a mix of 50% cash, 30% stocks, 20% fixed income.  The shift isn’t one he would recommend for millennials, and even for his midlife investors it requires opportunity-cost analysis. Clients using individual retirement accounts can shift into cash without tax impacts. For those invested in non-IRA vehicles, Mr. Shanahan says, it is worth evaluating the impact of capital-gains taxes connected to selling stocks versus the impact of potential portfolio losses.  “The tax pain is typically much less than losing what could be 20% of their assets’ value,” Mr. Shanahan says. “I don’t know when I’ll personally get back into the market.”  Who is using it: Middle-aged investors seeking to preserve some of their portfolio after the bull run.  Kris Garlewicz, a certified financial planner with Market Financial Group, a broker-dealer and registered investment adviser in Chicago, says his firm’s views on the long bull run continuing began to turn last August.  He cautions against reactionary portfolio rebalancing or “timing the market”—never a recommendation for long-term investors. But in recent months, he says, he has told a quarter of his clients to readjust their equity weightings.  He has helped some shift from a 70% stock and 30% bond split to portfolios containing 50% stocks, 30% bonds, and 15% to 20% in short-term bond funds or alternative investments, with a small remainder (under 5%) in cash.  “A lot of them see this as a time to take a breather from chasing returns,” he says. “The market has been just one straight line up. Markets don’t go up forever.”  Clients aren’t permanently ditching equities, but are using shorter-term investments they intend to revisit later.  “They want to take some chips off the table,” Mr. Garlewicz says. “It is what I’d call a ‘crash protection’ approach.”  Mr. Garlewicz says most of his clients are still in the prime of their working lives, ranging from their 30s to their 50s. Many are self-employed or operate small businesses and have lived through a variety of market cycles. Many say they have gained enough in the recent bull run that they’d rather protect their recent growth than continue betting with it, he says.  Doug Bellfy, a fee-only adviser with Synergy Financial Planning in South Gastonbury, Conn., says that for clients nearing retirement, rebalancing along the way should keep them protected from overexposure to stocks. He typically reduces near-retirees’ stock exposure by 2% annually in the five years leading to retirement, moving from a 60% stock and 40% fixed-income mix to a 50% stock, 40% fixed income and 10% cash portfolio.  Within the stock portion of such a portfolio, he often rebalances the stock and fund picks away from small stocks to emerging markets, figuring that small-caps have had a strong run and emerging markets are now more affordable.  Who is using it: Some young investors, and the “undersaved.”  All in with stock? There are always people who do it, including entrepreneurs with cash on hand. In theory, younger savers might place all (or nearly all) their retirement eggs in the equities basket, given their long time horizon before retirement, and thus the ability to ride out market cycles. Others may be close to retiring but short of their savings goals, and so hoping that a 100% allocation to stocks will make up for lost time. Few, if any, advisers would recommend such a move.  “You’d be hard-pressed to find anyone holding 100% equities” these days, Ms. Benz says. “Even portfolios for young accumulators should still have 5% cash or fixed income just for diversification.”  Target-date funds for the young, such as those assuming a 2055 retirement, tend to max out at 90% stock allocation.  All the cautions aside, Compass’s Mr. Shanahan and other advisers say stocks haven’t lost their status as a valuable tool for investors. Even with downward-calibrated expectations, stocks are still likely to deliver the highest returns, experts say.  Says Mr. Bellfy, “There are a lot of market headwinds going forward, but I still expect equities to deliver the highest returns among asset categories.”  Ms. Hodges is a writer in Seattle. She can be reached at reports@wsj.com.
With markets so iffy, here are four approaches for the amount of stock you should own in your retirement account—starting with the Big Zero scenario. Or should you go all-in?