Believe it or not, seniors fear running out of cash more than they fear dying.
Also, retirees who have constructed a nest egg have valid justifications to be concerned, since the traditional ways to plan for retirement may mean income can no longer cover expenses. Some retirees are now tapping their principal to make a decent living, pressed for time between decreasing investment balances and longer life expectancies.
Your parents' retirement investing plan won't cut it today.
Years ago, investors at or close to retirement could put money into fixed-income assets and depend on appealing yields to generate consistent, solid pay streams to fund a comfortable retirement. 10-year Treasury bond rates in the late 1990s floated around 6.50%, but unfortunately, those days of being able to exclusively rely on Treasury yields to fund retirement income are over.
The effect of this drop in rates is substantial: over 20 years, the change in yield for a $1 million investment in 10-year Treasuries is over $1 million.
And lower bond yields aren't the only potential problem seniors are facing. Today's retirees aren't feeling as secure as they once did about Social Security, either. Benefit checks will still be coming for the foreseeable future, but based on current estimates, Social Security funds will run out of money in 2035.
Unfortunately, it looks like the two traditional sources of retirement income - bonds and Social Security - may not be able to adequately meet the needs of present and future retirees. But what if there was another option that could provide a steady, reliable source of income in retirement?
Invest in Dividend Stocks
As we see it, dividend-paying stocks from generally low-risk, top notch companies are a brilliant way to create steady and solid income streams to supplant low risk, low yielding Treasury and fixed-income alternatives.
Look for stocks that have paid steady, increasing dividends for years (or decades), and have not cut their dividends even during recessions.
A rule of thumb for finding solid income-producing stocks is to seek those that average 3% dividend yield, and positive yearly dividend growth. These stocks can help combat inflation by boosting dividends over time.
Here are three dividend-paying stocks retirees should consider for their nest egg portfolio.
CTO Realty ( is currently shelling out a dividend of $0.38 per share, with a dividend yield of 7.19%. This compares to the REIT and Equity Trust - Other industry's yield of 4.37% and the S&P 500's yield of 1.62%. The company's annualized dividend growth in the past year was 14%. CTO Quick Quote CTO - Free Report) Check CTO Realty ( CTO Quick Quote CTO - Free Report) dividend history here>>> Entergy ( is paying out a dividend of $1.07 per share at the moment, with a dividend yield of 3.79% compared to the Utility - Electric Power industry's yield of 3.12% and the S&P 500's yield. The annualized dividend growth of the company was 6.32% over the past year. ETR Quick Quote ETR - Free Report) Check Entergy ( ETR Quick Quote ETR - Free Report) dividend history here>>>
Currently paying a dividend of $0.16 per share,
Huntington Bancshares ( has a dividend yield of 4.05%. This is compared to the Banks - Midwest industry's yield of 2.46% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 3.33%. HBAN Quick Quote HBAN - Free Report) Check Huntington Bancshares ( HBAN Quick Quote HBAN - Free Report) dividend history here>>> But aren't stocks generally more risky than bonds?
Overall, that is true. But stocks are a broad class, and you can reduce the risks significantly by selecting high-quality dividend stocks that can generate regular, predictable income and can also decrease the volatility of your portfolio compared to the overall stock market.
A silver lining to owning dividend stocks for your retirement portfolio is that many companies, especially blue chip stocks, increase their dividends over time, helping offset the effects of inflation on your potential retirement income.
Thinking about dividend-focused mutual funds or ETFs? Watch out for fees.
If you're interested in investing in dividends, but are thinking about mutual funds or ETFs rather than stocks, beware of fees. Mutual funds and specialized ETFs may carry high fees, which could lower the overall gains you earn from dividends, undercutting your dividend income strategy. Be sure to look for funds with low fees if you decide on this approach.
Whether you select high-quality, low-fee funds or stocks, seeking the steady income of dividend-paying equities can potentially offer you a path to a better and more stress-free retirement.