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.

The tried-and-true retirement investing approach of yesterday doesn't work 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.

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.

How can you avoid dipping into your principal when the investments you counted on in retirement aren't producing income? You can only cut your expenses so far, and the only other option is to find a different investment vehicle to generate income.

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.

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.

Acadia Realty Trust (AKR) is currently shelling out a dividend of $0.18 per share, with a dividend yield of 5.77%. This compares to the REIT and Equity Trust - Retail industry's yield of 4.88% and the S&P 500's yield of 1.81%. The company's annualized dividend growth in the past year was 20%. Check Acadia Realty Trust (AKR) dividend history here>>>

Apple Hospitality REIT (APLE) is paying out a dividend of $0.07 per share at the moment, with a dividend yield of 5.71% compared to the REIT and Equity Trust - Other industry's yield of 4.64% and the S&P 500's yield. The annualized dividend growth of the company was 2000% over the past year. Check Apple Hospitality REIT (APLE) dividend history here>>>

Currently paying a dividend of $0.24 per share, Brixmor Property (BRX) has a dividend yield of 5.19%. This is compared to the REIT and Equity Trust - Retail industry's yield of 4.88% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 11.63%. Check Brixmor Property (BRX) 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 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 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

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 Acadia Realty Trust (AKR) : Free Stock Analysis Report Apple Hospitality REIT, Inc. (APLE) : Free Stock Analysis Report Brixmor Property Group Inc. (BRX) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research