Believe it or not, seniors fear running out of cash more than they fear dying.

And older Americans have legitimate reasons for this worry, even if they have dutifully saved for their golden years. That's because the traditional ways people manage retirement may no longer provide enough income to meet expenses - and with people generally living longer, the principal retirement savings is exhausted far too early in the retirement period.

Your parents' retirement investing plan won't cut it today.

In the past, investors going into retirement could invest in bonds and count on attractive yields to produce steady, reliable income streams to fund a predictable retirement. 10-year Treasury bond rates in the late 1990s hovered around 6.50%, whereas the current rate is much lower.

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.

In addition to the considerable drop in bond yields, today's retirees are nervous about their future Social Security benefits. Because of certain demographic factors, it's been estimated that the funds that pay the Social Security benefits 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

We feel that these dividend-paying equities - as long as they are from high-quality, low-risk issuers - can give retirement investors a smart option to replace low-yielding Treasury bonds (or other bonds).

Look for stocks that have paid steady, increasing dividends for years (or decades), and have not cut their dividends even during recessions.

One way to identify suitable candidates is to look for stocks with an average dividend yield of 3%, and positive average annual dividend growth. Many stocks increase dividends over time, helping to offset the effects of inflation.

Here are three dividend-paying stocks retirees should consider for their nest egg portfolio.

Citizens Financial Group (CFG Quick QuoteCFG - Free Report) is currently shelling out a dividend of $0.42 per share, with a dividend yield of 5.78%. This compares to the Financial - Savings and Loan industry's yield of 3.04% and the S&P 500's yield of 1.72%. The company's annualized dividend growth in the past year was 7.69%. Check Citizens Financial Group (CFG Quick QuoteCFG - Free Report) dividend history here>>>

NRG Energy (NRG Quick QuoteNRG - Free Report) is paying out a dividend of $0.38 per share at the moment, with a dividend yield of 4.37% compared to the Utility - Electric Power industry's yield of 3.09% and the S&P 500's yield. The annualized dividend growth of the company was 7.86% over the past year. Check NRG Energy (NRG Quick QuoteNRG - Free Report) dividend history here>>>

Currently paying a dividend of $0.2 per share, Regions Financial (RF Quick QuoteRF - Free Report) has a dividend yield of 4.24%. This is compared to the Banks - Southeast industry's yield of 2.58% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 17.65%. Check Regions Financial (RF Quick QuoteRF - 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.

An upside to adding dividend stocks to your retirement portfolio: they can help lessen the effects of inflation, since many dividend-paying companies (especially blue chip stocks) generally increase their dividends over time.

Thinking about dividend-focused mutual funds or ETFs? Watch out for fees.

You may be thinking, "I like this dividend strategy, but instead of investing in individual stocks, I'm going to find a dividend-focused mutual fund or ETF." This approach can make sense, but be aware that some mutual funds and specialized ETFs carry high fees, which may reduce your dividend gains or income, and defeat the goal of this dividend investment approach. If you do wish to invest in a fund, do your research to find the best-quality dividend funds with the lowest fees.

Bottom Line

Regardless of whether you select high-quality, low-fee funds or stocks, looking for a steady stream of income from dividend-paying equities can potentially lead you to a solid and more peaceful retirement.