Here's a revealing data point: older Americans are scared more of outliving wealth than of death itself.

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.

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 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.

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.

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.

Euroseas Ltd. (ESEA Quick QuoteESEA - Free Report)

is currently shelling out a dividend of $0.6 per share, with a dividend yield of 6.21%. This compares to the Transportation - Shipping industry's yield of 3.14% and the S&P 500's yield of 1.43%. The company's annualized dividend growth in the past year was 20%. Check Euroseas Ltd. dividend history here>>>

T. Rowe Price (TROW Quick QuoteTROW - Free Report)

is paying out a dividend of $1.24 per share at the moment, with a dividend yield of 3.99% compared to the Financial - Investment Management industry's yield of 2.19% and the S&P 500's yield. The annualized dividend growth of the company was 1.64% over the past year. Check T. Rowe Price dividend history here>>>

Currently paying a dividend of $0.04 per share,

Whitestone (WSR Quick QuoteWSR - Free Report)

has a dividend yield of 3.33%. This is compared to the REIT and Equity Trust - Other industry's yield of 3.96% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 3.13%. Check Whitestone 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

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.