Believe it or not, seniors fear running out of cash more than they fear dying.

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.

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

For example, 10-year Treasury bonds in the late 1990s offered a yield of around 6.50%, which translated to an income source you could count on. However, today's yield is much lower and probably not a viable return option to fund typical retirements.

That means if you had $1 million in 10-year Treasuries, the difference in yield between 1999 and today 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.

So what can retirees do? You could dramatically reduce your expenses, and go out on a limb hoping your Social Security benefits don't diminish. On the other hand, you could opt for an alternative investment that gives a steady, higher-rate income stream to supplant lessening bond yields.

Invest in Dividend Stocks

As a replacement for low yielding Treasury bonds (and other bond options), we believe dividend-paying stocks from high quality companies offer low risk and stable, predictable income investors in retirement seek.

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.

Embotelladora Andina S.A. (AKO.B)is currently shelling out a dividend of $0.23 per share, with a dividend yield of 3.32%. This compares to the Beverages - Soft drinks industry's yield of 0% and the S&P 500's yield of 1.39%. The company's annualized dividend growth in the past year was 26.14%. Check Embotelladora Andina S.A. dividend history here>>>

Franklin Templeton (BEN)is paying out a dividend of $0.33 per share at the moment, with a dividend yield of 3.99% compared to the Financial - Investment Management industry's yield of 1.61% and the S&P 500's yield. The annualized dividend growth of the company was 3.23% over the past year. Check Franklin Templeton dividend history here>>>