As more and more baby boomers start to retire, many advisors will tell them to shift much of their equity assets into less volatile "buckets" like bonds and annuities, or even cash. In many cases, advisors will tell clients that their equity holdings in retirement should not exceed 20% of total assets.

But this conservative advice can be painful and even damaging for many modern-day retirees who have too few assets to afford them a comfortable retirement, or who are at risk of outliving the actuarial tables and their assets.

With this is mind, advisors should make sure that they are including a client's (or both clients' in the case of married couples) Social Security benefits not just in their income calculation, but as an integral part of the bond/annuity portion of their portfolio.

ALLOCATION CALCULATION

According to Steve Williams, head of U.S. financial planning at BMO Private Bank, in his experience most advisors fail to include their clients' Social Security benefits in the portfolio category of "guaranteed income stream" along with bonds and private annuities.

"It's kind of left out of the calculation for asset allocation," he says. "Yet actually, Social Security is like an annuity only better, as it includes an annual inflation adjustment and a death benefit for a spouse."

Williams argues that included in a portfolio as a kind of guaranteed income source, like bonds and annuities, Social Security can allow a client "to maybe take more risk by investing more assets in equities than they would otherwise consider reasonable."

This could be particularly useful in the case of those clients whose retirement savings or total assets are deemed insufficient, since the added equity investment should, over time, allow those assets to grow.

INCOME-PRODUCING ASSET

Counted as an income-producing asset, Social Security can be quite significant. The average Social Security benefit for a middle-class person who retires at 66 is about $1,800 a month or $23,400 a year.

To generate that kind of income, with a 2% annual inflation adjustment and survivor benefit, using a private annuity, Fidelity Investment's online annuity calculator estimates someone aged 66 would have to invest $500,000.

Blackrock's head of retirement education Rob Kron puts it slightly differently. He says, "If it looks like Social Security will be able to cover a client's or client couple's essentials, then that can allow them to take more risk with their invested assets."

Dave Lindorff spent five years as a China correspondent for Businessweek, and has written for The Nation and Salon.com.

This story is part of a 30-day series on Social Security and retirement income strategies.