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3 Top Dividend Stocks to Maximize Your Retirement Income

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

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.

For many years, bonds or other fixed-income assets could produce the yield needed to provide solid income for retirement needs. However, these yields have dwindled over time: 10-year Treasury bond rates in the late 1990s were around 6.50%, but today, that rate is a thing of the past, with a slim likelihood of rates making a comeback in the foreseeable future.

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While this yield reduction may not seem drastic, it adds up: for a $1 million investment in 10-year Treasuries, the rate drop means a difference in yield of 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.

Banco Bilbao (BBVA) is currently shelling out a dividend of $0.35 per share, with a dividend yield of 5.98%. This compares to the Banks - Foreign industry's yield of 3.86% and the S&P 500's yield of 1.56%. The company's annualized dividend growth in the past year was 45.61%. Check Banco Bilbao (BBVA) dividend history here>>>

General Mills (GIS) is paying out a dividend of $0.59 per share at the moment, with a dividend yield of 3.37% compared to the Food - Miscellaneous industry's yield of 0% and the S&P 500's yield. The annualized dividend growth of the company was 9.26% over the past year. Check General Mills (GIS) dividend history here>>>

Currently paying a dividend of $0.4 per share, GSK (GSK) has a dividend yield of 3.9%. This is compared to the Medical - Biomedical and Genetics industry's yield of 0% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 19.19%. Check GSK (GSK) dividend history here>>>

But aren't stocks generally more risky than bonds?

The fact is that stocks, as an asset class, carry more risk than bonds. To counterbalance this, invest in superior quality dividend stocks that not only can grow over time but more significantly, can also decrease your overall portfolio volatility with respect 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 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

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.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Banco Bilbao Viscaya Argentaria S.A. (BBVA) : Free Stock Analysis Report

GSK PLC Sponsored ADR (GSK) : Free Stock Analysis Report

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

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Zacks Investment Research