If you're a retiree in your early 60s, you have a pretty good chance at another three decades of retirement. That means it's more important than ever to create an income stream that grows faster than the cost of living.

Welltower Inc. (NYSE:WELL) and Realty Income Corp. (NYSE:O) offer market-beating dividend yields up front, plus they benefit from strong positions in their respective niches. Here's why this pair is a perfect fit for retirees and cautious investors of all ages.

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1. Welltower: A major player in the middle of an unstoppable trend

America's population of people over the age of 85 is expected to double during the next 20 years, which means demand for senior housing, and senior-specific healthcare, isn't going anywhere but up. Welltower owns (and in some cases operates) 1,277 healthcare properties that make it the country's single largest real estate investment trust (REIT) with concentrated exposure to these senior-specific fields.

Changes to the way Medicare and Medicaid reimburse facilities have made the senior housing business unusually challenging over the past several years, but that hasn't stopped Welltower from meeting its dividend commitment. With the exception of a brief dip in late 2006 and early 2007, this REIT's made fairly regular payout bumps that have kept the distribution rising for decades.

Since its inception 46 years ago, Welltower has delivered a 15.5% annual return by skating to where the puck's going to be, and in recent years that's meant lots of asset sales. Lower profits from fewer assets have made it hard to raise the dividend payout, but it will probably be worth the struggle. Now, the company's restructured portfolio is made up of competitive properties mostly located in affluent healthcare markets.

Welltower shares offer a big 5.5% dividend yield at recent prices. Although the restructuring program might make it hard to deliver big payout bumps in the near term, a pivot toward high-margin revenue from private end payers could help this REIT outperform for retirees in the decades to come.

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2. Realty Income: Monthly payouts and market-beating gains

Since going public in 1994, shares of Realty Income have delivered a 15.8% annual return. Predictable cash flows from a portfolio that currently boasts over 5,100 real estate properties have allowed this REIT to boost its monthly payout 96 times in its 24-year history as a public company. At recent prices, the stock offers a nice 4.7% dividend yield and appears ready to outperform for at least a couple more decades. 

This is a quintessential set-it-and-forget-it stock for shareholders partly because it takes a similar approach with its tenants. Realty Income is a champion of signing long-term net lease agreements that place responsibility for taxes, maintenance, and other variable expenses on the tenant. Once a new 7-Eleven moves in, Realty Income can expect at least a decade of rock-steady cash flows.

Investing in any single one of the brick-and-mortar retailers that lease Realty Income properties is probably too risky for most retirees, but its diverse revenue stream makes it a solid retirement stock. Although most brick-and-mortar retail markets have taken a hit recently, this REIT has kept its portfolio focused on businesses that meet criteria that should allow them to continue paying rent for the long run. For example, its fitness center and movie theater tenants are highly resistant to e-commerce while dollar stores tend to do best when the economy's at its worst.

Even during the depth of the latest recession occupancy bottomed out at 96.6% in 2010 and has since risen to an outstanding 98.6% with more than half of rental revenue coming from tenants with investment-grade credit ratings.

Older man looking at rising stacks of coins.

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Be ready for the long haul

Realty Income and Welltower have what it takes to deliver market-beating gains, but investors need to understand that rapidly rising interest rates can have a twofold effect on REITs. Higher interest rates drive up borrowing costs, which can squeeze profit margins over the long run. In the short term, higher rates push REIT prices down because investors demand higher yields to compete with safer assets, such as Treasury bonds.

High-interest-rate environments generally coincide with economic booms, which should allow these REITs to make enough rent increases to keep their payouts rising into the long run. While one can be fairly confident that careful capital allocation will keep those dividend payments flowing, there isn't a lot to be done about temporary stock movements to the downside other than wait.

That's all fine and good if you've retired with a large enough nest egg that dividend payments on their own meet your income needs. If you're going to need to make steady withdrawals from your principal, though, fixed income investing might be a better option.

Cory Renauer owns shares of Realty Income. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.