Retirees love dividend stocks because they provide regular income along with potential growth. The path to passive income in retirement is pretty straightforward, but it requires some planning. Keep these three steps in mind as you work toward your dividend income goals.

1. Save

The first step in this process is by far the hardest, because it requires consistent discipline over the course of multiple decades. You need to build assets to generate dividend income, and saving your income is the only reliable way to build assets.

Most people know that it's important to save, but very few households retain enough of their income. Some of that is due to tight budgets in our modern economy, but disorganization is a major culprit. Many savers don't know their target savings rate or how much they'll need to retire comfortably. It's hard to meet your goals if they're poorly defined or not measurable.

Attaching numbers to your financial planning is a huge first step. Households should strive to save at least 15% of annual income. Today's average savings rate is closer to 5%, so it's obviously difficult to hit that 15% goal. That's why it's so important to embrace a few tried-and-true strategies, including:

• Budget setting is an obvious, effective solution. It helps you to make informed decisions about consumption, which reduces the likelihood that frivolous purchases will disrupt your progress.
• If your employer offers a 401(k) match, take full advantage of it. Contribution matches are basically free money that gets tucked away on a tax-deferred basis to grow until retirement.
• Many people improve their savings rate by splitting direct deposits into multiple accounts. Some income flows to a checking account for bills and spending, while a set amount goes into a dedicated savings account to avoid being spent. Over time, you'll build a cash reserve, and you can invest those assets when there's enough.
• It's also important to be smart with debt. Credit cards and other high-interest consumer debt can destroy your ability to save, so avoid carrying those balances. If you are already burdened with high-interest debt, consider options to responsibly refinance those to reduce your expenses.

Unexpected expenses and income interruptions are bound to pop up, so don't get discouraged when things don't go smoothly. Keep those long-term goals in mind. Over a 30-year window, a household with an average annual income of $100,000 and a 15% savings rate will set aside $450,000.

2. Invest for growth

As you accumulate savings, you can invest to achieve growth. That should result in an even larger pile of assets when you reach retirement.

Young savers should prioritize growth in their retirement accounts. That doesn't mean that you should pursue risky investments, but a long time horizon allows investors to tolerate a high level of volatility. If you're more than 15 years away from retirement, it's important to allocate heavily toward stocks rather than bonds.

The same goes for growth stocks, emerging markets, small caps, and other volatile investments with long-term upside. These assets suffer bigger losses during bear markets, but young investors should have plenty of time to recover as stocks eventually tend toward long-term growth.

Volatility management becomes more important as you approach retirement. There's not as much time to recover from a potential market crash, so years of gains can be wiped out if you get too greedy. The hard work is behind you, and it's time to lock in some gains. People approaching retirement should start allocating more toward bonds, cash, and dividend stocks. It's still important to retain some exposure to stocks and growth, so don't change everything completely. Just rebalance diligently as your investment time horizon gets shorter.

Make sure that you use some sort of risk tolerance questionnaire to guide any allocation decisions. It's not a good idea to take on excessive risk for the sake of growth. Balance is key.

An 7% average rate of return over 30 years can turn that $450,000 saved into $1.4 million.

3.  Buy dividend stocks

The final step is taking some of those amassed savings and buying dividend stocks. You shouldn't dedicate all of your assets to these stocks, but they can still make up a healthy chunk of your portfolio.

Dividend yield varies with stock market conditions. Yield also varies among stocks, based on the likelihood that the company can sustain and grow its distributions to shareholders. Yields for blue chip dividend stocks and some popular dividend ETFs are generally in the 2% to 3% range right now. Equities that yield much higher than that are reflecting some sort of investment risk, and it's probably wise to avoid those with your retirement savings.

A $1.4 million portfolio of dividend stocks can reliably generate roughly $3,000 per month, based on today's yields. If you want monthly dividend income, make sure that you don't load up on stocks that all pay dividends at the same time. Most companies pay quarterly distributions, so look for stocks that pay monthly, or diversify enough to spread out your dividend payments.