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

And unfortunately, even retirees who have built a nest egg have good reason to be concerned - with the traditional approaches to retirement planning, income may no longer cover expenses. That means retirees are dipping into principal to make ends meet, setting up a race against time between dwindling investment balances and longer lifespans.

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

For many years, bonds or other fixed-income assets could produce the yield needed to provide solid income for retirement needs. However, these yields have dwindled over time: 10-year Treasury bond rates in the late 1990s were around 6.50%, but today, that rate is a thing of the past, with a slim likelihood of rates making a comeback in the foreseeable future.

The impact of this rate decline is sizable: over 20 years, the difference in yield for a $1 million investment in 10-year Treasuries is more than $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.

How can you avoid dipping into your principal when the investments you counted on in retirement aren't producing income? You can only cut your expenses so far, and the only other option is to find a different investment vehicle to generate income.

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.

Going beyond those familiar names, you can find excellent dividend-paying stocks by following a few guidelines. Look for companies that pay a dividend yield of around 3%, with positive annual dividend growth. The growth rate is key to help combat the effects of inflation.

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

Amgen (AMGN Quick QuoteAMGN - Free Report)

is currently shelling out a dividend of $2.25 per share, with a dividend yield of 3.06%. This compares to the Medical - Biomedical and Genetics industry's yield of 0% and the S&P 500's yield of 1.43%. The company's annualized dividend growth in the past year was 5.63%. Check Amgen dividend history here>>>

Brixmor Property (BRX Quick QuoteBRX - Free Report)

is paying out a dividend of $0.29 per share at the moment, with a dividend yield of 3.65% compared to the REIT and Equity Trust - Retail industry's yield of 3.61% and the S&P 500's yield. The annualized dividend growth of the company was 4.81% over the past year. Check Brixmor Property dividend history here>>>

Currently paying a dividend of $0.47 per share,

Community Trust Bancorp (CTBI Quick QuoteCTBI - Free Report)

has a dividend yield of 3.15%. This is compared to the Banks - Southeast industry's yield of 2.07% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 2.17%. Check Community Trust Bancorp dividend history here>>>

But aren't stocks generally more risky than bonds?

The fact is that stocks, as an asset class, carry more risk than bonds. To counterbalance this, invest in superior quality dividend stocks that not only can grow over time but more significantly, can also decrease your overall portfolio volatility with respect to the broader stock market.

Combating the impact of inflation is one advantage of owning these dividend-paying stocks. Here's why: many of these stable, high-quality companies increase their dividends over time, which translates to rising dividend income that offsets the effects of inflation.

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

If you prefer investing in funds or ETFs compared to individual stocks, you can still pursue a dividend income strategy. However, it's important to know the fees charged by each fund or ETF, which can ultimately reduce your dividend income, working against your strategy. Do your homework and make sure you know the fees charged by any fund before you invest.

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.