Here’s an eye-opening statistic: older Americans are more afraid of running out of money than of death itself.

And retirees have good reason to be worried about making their assets last. People are living longer, so that money has to cover a longer period. Making matters worse, income generated using tried-and-true retirement planning approaches may not cover expenses these days. That means seniors must dip into principal to meet living expenses.

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 effect of this drop in rates is substantial: over 20 years, the change in yield for a $1 million investment in 10-year Treasuries is over $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’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

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.

HSBC (HSBC) is currently shelling out a dividend of $0.5 per share, with a dividend yield of 5.32%. This compares to the Banks – Foreign industry’s yield of 4.56% and the S&P 500’s yield of 1.65%. The company’s annualized dividend growth in the past year was 68.15%. Check HSBC (HSBC) dividend history here>>>

Marine Products (MPX) is paying out a dividend of $0.14 per share at the moment, with a dividend yield of 4.04% compared to the Leisure and Recreation Products industry’s yield of 0% and the S&P 500’s yield. The annualized dividend growth of the company was 16.67% over the past year. Check Marine Products (MPX) dividend history here>>>

Currently paying a dividend of $0.29 per share, Corporate Office Properties (OFC) has a dividend yield of 4.4%. This is compared to the REIT and Equity Trust – Other industry’s yield of 4.82% and the S&P 500’s current yield. Annualized dividend growth for the company in the past year was 3.64%. Check Corporate Office Properties (OFC) 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.

A silver lining to owning dividend stocks for your retirement portfolio is that many companies, especially blue chip stocks, increase their dividends over time, helping offset the effects of inflation on your potential retirement income.

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

Pursuing a dividend investing strategy can help protect your retirement portfolio. Whether you choose to invest in stocks or through low-fee mutual funds or ETFs, this approach can potentially help you achieve a more secure and enjoyable retirement.
HSBC Holdings plc (HSBC): Free Stock Analysis Report

Corporate Office Properties Trust (OFC): Free Stock Analysis Report

Marine Products Corporation (MPX): Free Stock Analysis Report

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