As health-care technology improves, so do your chances of living longer. In fact, the Centers for Disease Control projects that an individual born in 1950 will live an average of 14 years after he or she reaches the age of 65 -- and an individual born in 1990 will live an additional 17 years.

That's great news. It means more time to spend with loved ones and do the things you've always wanted to do.

But based on this information, you must ask yourself: "Is my portfolio built to last 20 or even 30 years after I retire?"

Keep growing
In order for your portfolio to withstand decades of withdrawals, it needs to keep growing throughout your retirement years.

Bonds and CDs alone won't do the trick. Inflation simply eats away too much of their returns over the long haul. Yes, they definitely have a place in your retirement portfolio to help preserve capital, but today's retirement reality means that you must both preserve and grow your retirement savings during retirement.

As Duncan Richardson, chief equity investment officer at Eaton Vance, recently noted, "Asset-allocation models that have been used for the last 30 years may be wrong. People need to maintain equity exposure as they retire to help ensure they don't outlive their assets."

This is precisely why the Vanguard Target Retirement Income Fund (VTINX), which is designed for current retirees, earmarks 30% of its assets for stocks.

The stocks you need
But, let's face it, in your retirement years, it's not prudent to dedicate a large chunk of your assets to high-risk ventures. Rather, you need equities that act a little bit more like bonds. In other words, you need dividend-paying stocks.

This investment class will not only help you grow your savings -- it will also pay dividends that you can use to supplement your income, reinvest, or use to mitigate against potential stock market swings.

Get started now
There are various ways to get exposure to dividend-paying stocks. One way is to invest in a diversified fund or ETF like the iShares Dow Jones Select Dividend Index, whose top holdings include:


Dividend Yield

Altria (NYSE:MO)


PNC Financial (NYSE:PNC)


Merck (NYSE:MRK)


Nicor (NYSE:GAS)


Wachovia (NYSE:WB)


Key Corp. (NYSE:KEY)


Since this ETF began trading in November 2003, it has returned 58% to its shareholders and yields 3.1% -- and charges a reasonable 0.40% expense ratio. As with any index fund or ETF, however, diversification comes with a price -- namely, potentially watered-down returns. There are 115 stocks in this ETF, and the returns, prospects, and yields of each company vary.

Choosing only the best dividend payers in the market is your ticket to doing even better. A great place to start your research is to look for companies with payout ratios below 50% and a history of growing dividends.

Another great place to start is by cherry-picking from our list of Motley Fool Income Investor recommendations -- which average a greater than 4% yield and are beating the market by more than seven percentage points since the newsletter's inception. A free 30-day trial to Income Investor gives you access to every pick and buy report, with no obligation to subscribe. Just follow this link for more information.

Merck is a former Income Investor pick.

This article was originally published on Jan. 19, 2007. It has been updated.

Todd Wenning does not own shares in any company mentioned. The Fool has a disclosure policy.