Here's an eye-opening statistic: older Americans are more afraid of running out of money 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.

Years ago, investors at or close to retirement could put money into fixed-income assets and depend on appealing yields to generate consistent, solid pay streams to fund a comfortable retirement. 10-year Treasury bond rates in the late 1990s floated around 6.50%, but unfortunately, those days of being able to exclusively rely on Treasury yields to fund retirement income are over.

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.

Today's retirees are getting hit hard by reduced bond yields-and the Social Security picture isn't too rosy either. Right now and for the near future, Social Security benefits are still being paid, but it has been estimated that the Social Security funds will be depleted as soon as 2035.

So what's a retiree to do? You could cut your expenses to the bone, and take the risk that your Social Security checks don't shrink. Or you could find an alternative investment that provides a steady, higher-rate income stream to replace dwindling bond yields.

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.

Autoliv, Inc. (ALV Quick QuoteALV - Free Report) is currently shelling out a dividend of $0.87 per share, with a dividend yield of 3.02%. This compares to the Automotive - Original Equipment industry's yield of 0% and the S&P 500's yield of 1.54%. The company's annualized dividend growth in the past year was 2.94%. Check Autoliv, Inc. dividend history here>>>

S&T Bancorp (STBA) is paying out a dividend of $0.36 per share at the moment, with a dividend yield of 3.79% compared to the Banks - Northeast industry's yield of 2.14% and the S&P 500's yield. The annualized dividend growth of the company was 3.03% over the past year. Check S&T Bancorp dividend history here>>>

Currently paying a dividend of $0.15 per share, TIM S.A. Sponsored ADR (TIMB) has a dividend yield of 4.25%. This is compared to the Wireless Non-US industry's yield of 1.67% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 126.36%. Check TIM S.A. Sponsored ADR dividend history here>>>

But aren't stocks generally more risky than bonds?

Yes, that's true. As a broad category, bonds carry less risk than stocks. However, the stocks we are talking about-dividend-paying stocks from high-quality companies-can generate income over time and also mitigate the overall volatility of your portfolio compared to the stock market as a whole.

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.