With interest rates stuck near historical lows, retirees may find it harder to meet their income needs through bonds alone. Instead, more should think about adding dividend-paying stocks and related exchange traded funds to bolster yields.

In a hypothetical case, an investor would likely target a $1 million retirement investment and yield of inflation-adjusted $40,000 a year, or 4% portfolio withdrawal rate, writes Jonathan Clements for the Wall Street Journal.

However, given today’s prices and a 4% withdrawal rate, one would need to put almost $1 in Treasuries for every $1 one hopes to spend in retirement to maintain 27 or 28 years of retirement income, and nothing would be left over if you lived longer.

“Liability matching with bonds is so terribly expensive that most people just can’t afford to do it,” Charles Farrell, chief executive of Northstar Investment Advisors, said in the WSJ article. “You could bump up the income a little by buying corporate bonds rather than Treasurys. But then you have issues with credit quality.”

Alternatively, investors can consider dividend stocks instead. Farrell suggests investors try to ignore price appreciation and focus on the dividend aspect.

“If you put together a portfolio of good blue chips, you might start with a yield of 3%,” Farrell added. “You have to train your brain to ignore the price movement. You want to focus on the income production and the growth of that income.”

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