Dividends are an important part of most retirement income plans. Without cash flow coming from work, you'll rely on your own investment portfolio to supplement Social Security benefits. It's probably not fair to call any of the steps below "easy," but they're absolutely reasonable goals for many households. Every family's financial circumstances are unique, but consider the underlying strategy and principles below that make these steps work.

1. Save 15% to 20% of your income during your working years

Not all dividend income strategies are built the same, but there's only so much yield you can achieve without taking on excessive risk. Stable dividends usually carry dividend yields between 2% to 3%. You might find some overlooked stocks yielding 5% to 6%, but that's somewhat rare and generally means you're taking on a bit more risk.

As a result, your monthly dividend income depends on the amount of assets you accumulate in an investment account. Saving is the first step in asset accumulation. The average personal savings rate in the U.S. has fallen between 5% to 10% of total annual income in the 2000s. That's substantially lower than in past decades. With fewer retirees receiving pensions today, saving a high percentage of income is more important than ever.

You should strive to save 15% to 20% of annual income. Median household income is around $70,000 in the U.S. A median household should therefore try to set aside a minimum of $10,000 per year, or $830 per month. Not everyone is capable of achieving this, but it's a good goal to have.

To successfully meet that goal, develop a system to set aside a portion of each paycheck. Try to take full advantage of any employer match to 401(k) or other retirement accounts. Auto-deposit a certain amount of each paycheck into a savings account that isn't used for bills or spending. That keeps your savings out of your checking account, which is easier to spend from. Creating some rules for yourself and saving systematically are important steps for organization.

With 30 years before retirement, the average household should be able to accumulate $300,000 by the time they stop working. Assuming a 3% average income increase each year, those savings would total $475,000 the day you retire.

Senior person happy about cash in hand.

Image source: Getty Images.

2. Invest your savings for growth over the years

Saving might be the boring "blocking and tackling" part of asset building, but investing for growth is the fun part. If you don't invest the right way, you're going to miss out on a lot of dividend income in retirement. The key here is developing a long-term strategy that balances growth and risk. It also needs to evolve with your age.

Early on, you need to prioritize growth by investing in stocks. Your early professional years are especially well-suited for high-growth stocks that might be a bit more volatile or risky. A longer investment time horizon means that you have a longer time to recover from losses and downturns.

The S&P 500 has never delivered negative net returns over any 15-year period, but it's had plenty of bear markets in various one- to five-year spans. Short-term losses are just speed bumps along a long-term upward trajectory. Moreover, the effects of compounding mean that any growth that's sacrificed will result in a major lost opportunity after multiple decades. You can't afford to leave too much growth on the table. Luckily, there are more than enough stocks, exchange-traded funds (ETFs), and mutual funds that are designed to outpace the market.

As you approach retirement, you'll want to eliminate some portfolio risk by purchasing bonds and owning less volatile stocks such as Dividend Aristocrats. Without as much time to recover from bear markets, it's wise to protect some of the gains you've accumulated. As time passes, you need to shift priorities from growth to volatility management.

Consider the above household saving $10,000 annually. If we assume a 5% average net return, the $475,000 saved in a no-growth scenario is built into $975,000. That's a striking difference, and it will lead to much more dividend income in retirement. For reference, the S&P 500 averages 8% to 10% annually, so a 5% rate of return is rather conservative.

3. Build a great dividend investment strategy

Finally, you have to build a dividend investment strategy that's going to maximize income without incurring too much risk. It's not a great idea to expose yourself to catastrophic losses in retirement, so make sure not to chase high yields from stocks in distressed industries. It's still okay to mix in some higher-yield stocks that the market has forgotten, as long as they meet some criteria for financial health and stable outlooks.

Examples of these today include energy stocks with clean balance sheets or REITs whose tenants weathered the pandemic and are now flourishing during the reopening. You might also want to consider dividend-focused ETFs, which will provide periodic distributions just like a stock would. Those are great tools to outsource risk management and dividend maximization.

You should also pay attention to the timing of your dividend payments, especially if monthly cash flows are important. Most companies pay quarterly dividends. You can own different stocks that pay out in different months to smooth out those cash flows. You can also consider the handful of stocks and REITs that make monthly distributions to shareholders.

Take the above scenario where you've saved $975,000 by the day you retire. If you can achieve a 2.5% dividend yield across your portfolio, you could generate $24,375 in annual dividend income. That's $2,031 spread out evenly across each month of the year.

Obviously, there are no guarantees in financial planning, and there are plenty of variables at play when we are talking about dividend income many years in the future. Still, the math above makes sense. Many families will experience something similar to the hypothetical here. If you add that $2,000 each month to the average Social Security benefit (around $1,500 for 65 year-olds right now), then you're going to have a decent amount of cash flow to bankroll a safe and rewarding retirement.