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.

Retirement investing approaches of the past don't work 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.

That means if you had $1 million in 10-year Treasuries, the difference in yield between 1999 and today is more than $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.

So what can retirees do? You could dramatically reduce your expenses, and go out on a limb hoping your Social Security benefits don't diminish. On the other hand, you could opt for an alternative investment that gives a steady, higher-rate income stream to supplant lessening bond yields.

Invest in Dividend Stocks

As a replacement for low yielding Treasury bonds (and other bond options), we believe dividend-paying stocks from high quality companies offer low risk and stable, predictable income investors in retirement seek.

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.

Associated Banc-Corp (ASB Quick QuoteASB - Free Report)

is currently shelling out a dividend of $0.23 per share, with a dividend yield of 4.08%. This compares to the Banks - Midwest industry's yield of 2.66% and the S&P 500's yield of 1.62%. The company's annualized dividend growth in the past year was 4.55%. Check Associated Banc-Corp dividend history here>>>

Coterra Energy (CTRA Quick QuoteCTRA - Free Report)

is paying out a dividend of $0.22 per share at the moment, with a dividend yield of 3.84% compared to the Oil and Gas - Exploration and Production - United States industry's yield of 0% and the S&P 500's yield. The annualized dividend growth of the company was 4.76% over the past year. Check Coterra Energy dividend history here>>>

Currently paying a dividend of $0.84 per share,

Intesa Sanpaolo SpA (ISNPY Quick QuoteISNPY - Free Report)

has a dividend yield of 4.74%. This is compared to the Banks - Foreign industry's yield of 3.84% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 14.34%. Check Intesa Sanpaolo SpA dividend history here>>>

But aren't stocks generally more risky than bonds?

It is true that stocks, as an asset class, carry more risk than bonds, but high-quality dividend stocks not only have the ability to produce income growth over time but more importantly, can also reduce your overall portfolio volatility relative to the broader stock market.

An advantage of owning dividend stocks for your retirement nest egg is that numerous companies, particularly blue chip stocks, raise their dividends over time, helping alleviate the impact of inflation on your potential retirement income.

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

If you're thinking, "I want to invest in a dividend-focused ETF or mutual fund," make sure to do your homework. It's important to know that some mutual funds and specialized ETFs charge high fees, which may diminish your dividend gains or income and thwart the overall objective of this investment strategy. If you do want to invest in fund, research well to identify the best-quality dividend funds with the least charges.

Bottom Line

Seeking steady, consistent income through dividends can be a smart option for financial security in retirement, whether you invest in mutual funds, ETFs, or in dividend-paying stocks.