Here's a revealing data point: older Americans are scared more of outliving wealth than of death itself.
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.
For example, 10-year Treasury bonds in the late 1990s offered a yield of around 6.50%, which translated to an income source you could count on. However, today's yield is much lower and probably not a viable return option to fund typical retirements.
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.
Ameren ( is currently shelling out a dividend of $0.63 per share, with a dividend yield of 3.01%. This compares to the Utility - Electric Power industry's yield of 3.18% and the S&P 500's yield of 1.74%. The company's annualized dividend growth in the past year was 7.27%. AEE Quick Quote AEE - Free Report) Check Ameren ( AEE Quick Quote AEE - Free Report) dividend history here>>> New Jersey Resources ( is paying out a dividend of $0.39 per share at the moment, with a dividend yield of 3.02% compared to the Utility - Gas Distribution industry's yield of 3.02% and the S&P 500's yield. The annualized dividend growth of the company was 7.59% over the past year. NJR Quick Quote NJR - Free Report) Check New Jersey Resources ( NJR Quick Quote NJR - Free Report) dividend history here>>>
Currently paying a dividend of $0.2 per share,
Regions Financial ( has a dividend yield of 4.22%. This is compared to the Banks - Southeast industry's yield of 2.39% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 17.65%. RF Quick Quote RF - Free Report) Check Regions Financial ( RF Quick Quote RF - 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.
Pursuing a dividend investing strategy can help protect your retirement portfolio. Whether you choose to invest in stocks or through low-fee mutual funds or ETFs, this approach can potentially help you achieve a more secure and enjoyable retirement.