If you're like most investors, your ultimate goal is building a nice retirement nest egg, or at least improving the financial circumstances of the retirement you've already begun. We all just want enough cash to cover all our bills and all our fun dreams during our golden years.

The thing is, pensions and Social Security probably won't cut it for most people. The average retiree's monthly Social Security check in 2020 was a modest $1,544. And while some pensions are still being paid to remaining plan participants, most companies have punted retirement savings duties to workers themselves.

If you're looking for a comfortable retirement, you're mostly going to have to make it happen for yourself. That means living off dividend income in retirement, which in turn means growing a nest egg large enough to buy enough dividend stocks later in life. An extra $1,000 a month would make a big difference for a lot of retirees.

With that being said, here's a rough three-step plan on how to reach that goal. Logistically, each step is simple enough. The challenge lies in persistently maintaining our focus over many years

1. Invest in reliable growth stocks for 30 years or so

There are plenty of growth stocks to choose from. But not all of them are reliable growth stocks. Google parent Alphabet (GOOG 0.92%) (GOOGL 0.93%) is a reliable growth name, for instance, dominating the search engine market, and is likely to continue doing so for the indefinite future. Intel (INTC -0.03%) is another growth name, but not one that's reliable enough to hang on to for the long haul. Years of R&D missteps are now haunting the company, and by extension, haunting shareholders. As a result, the stock is trading where it was as of early 2018, upsetting anyone with a big stake in Intel who was planning three years ago to retire in 2021.

Man holding a box with dollar bills flying out of it.

Image source: Getty Images.

There's a specific target to aim for, too. It requires around $600,000 upon retirement to generate $12,000 worth of dividend income per year at the market's current dividend yields. Assuming you start seriously investing in your mid-30's and achieve the average annual market return of around 10%, compounding the returns on a contribution of $300 per month would get you past the $600,000 mark after three decades. Start saving later in life, and your monthly contribution figure will be considerably different.

You could also build a nice nest egg using lower-returning value stocks, or dividend stocks, or a mix of all three. Recent history suggests that this lower-return path would require much bigger monthly contributions to reach the $600,000 mark, though, while smaller monthly contributions could get you there if you're able to find and stick with the very best growth picks.

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2. Start transitioning from growth to dividend stocks well before your retirement date

Growth names like Alphabet (or even Intel) might be appropriate picks when you're younger and working, and have time to wait out any temporary pullbacks. Retirees in need of income right now don't always have the luxury of holding out for better days, though.

In fact, smart investors begin transitioning away from riskier, growth-oriented picks and into safer dividend payers well before they actually call it quits at work. This affords them an opportunity to get out of overvalued growth names on their own terms rather than the market's terms. Likewise, this early migration gives investors a chance to scoop up dividend-paying stocks while they're cheap, even if those investors don't actually need the income just yet.

Just bear in mind this shift doesn't all have to happen at the same time, or even in the same year. It should be a process rather than an event.

3. Unless things change, commit at least $600,000 to dividend-paying stocks by the time you retire

Finally, the $600,000 figure mentioned above isn't a number randomly pulled out of a hat. It's the amount you'll need to generate $1,000 worth of monthly dividend income using today's prevailing dividend yields; an average yield of 2% on $600,000 worth of dividend stocks works out to $12,000 in dividends per year.

Alert investors might immediately recognize the S&P 500's current yield is a much-lower 1.3%. Just keep in mind that a bunch of companies that don't pay a dividend (or don't care much about paying one) are weighing the average down. For instance, the S&P 500 High Dividend Index only includes the S&P 500's 80 highest-yielding names, and it's currently yielding 4%. Anyone seeking out good dividend growth and the healthy chance for a little capital appreciation may find they like the stocks somewhere in the middle of that continuum, where reliable yields of around 2% are readily attainable.

The good news is, interest rates (and therefore dividend yields) might be on the verge of prolonged increases. If they trek higher for some time, it's possible you'd only need $500,000 to drive $1,000 worth of monthly dividend checks. An average dividend yield of only 2.4% would do the trick.

The bad news is, it could be years before yields from well-balanced companies could get back to that mark, last seen in the 1990s, if they ever get back there at all.

Continually updating any plan is the key

This is only a rough outline. Investors with less time to save will want to save more, while anyone due a pension as well as a Social Security check may not need another $1,000 per month. Yields change, too. Your retirement savings plan should be reviewed every year, and updated as needed.

If you're just now starting to put a bigger-picture investment plan together, this rough outline gives you plenty to consider, and prompts plenty of questions to ask. Even answering just a few of them now is better than doing nothing and hoping for the best.