Strange but true: seniors fear death less than running out of money in retirement.

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.

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.

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

Dividend-paying stocks from low-risk, high-quality companies are a smart way to generate steady and reliable attractive income streams to replace low risk, low yielding Treasury and bond options.

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.

General Mills (GIS) is currently shelling out a dividend of $0.59 per share, with a dividend yield of 3.06%. This compares to the Food – Miscellaneous industry’s yield of 0% and the S&P 500’s yield of 1.59%. The company’s annualized dividend growth in the past year was 5.88%. Check General Mills (GIS) dividend history here>>>

NRG Energy (NRG) is paying out a dividend of $0.38 per share at the moment, with a dividend yield of 3.95% compared to the Utility – Electric Power industry’s yield of 3.38% 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) dividend history here>>>

Currently paying a dividend of $0.25 per share, Tanger Factory Outlet (SKT) has a dividend yield of 4.16%. This is compared to the REIT and Equity Trust – Retail industry’s yield of 4.16% and the S&P 500’s current yield. Annualized dividend growth for the company in the past year was 22.5%. Check Tanger Factory Outlet (SKT) 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.

If you’re interested in investing in dividends, but are thinking about mutual funds or ETFs rather than stocks, beware of fees. Mutual funds and specialized ETFs may carry high fees, which could lower the overall gains you earn from dividends, undercutting your dividend income strategy. Be sure to look for funds with low fees if you decide on this approach.

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.

General Mills, Inc. (GIS): Free Stock Analysis Report

NRG Energy, Inc. (NRG): Free Stock Analysis Report

Tanger Factory Outlet Centers, Inc. (SKT): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

This article originally appeared on Zacks

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.