"You're lucky. You're not even 40 yet."

Living in a small rural community with an above-average number of people in or near retirement, I hear comments like that fairly often. Once people I meet find out I'm a financial planner, many don't hesitate to share their feelings and frustrations about their investments.

The sentiment behind that simple statement tells volumes about how average people still feel about the markets. Although I run into the occasional person who swears they'll never buy another stock or mutual fund again, the vast majority of people still strongly believe that the economy will recover, that stocks will rise again, and that we'll eventually get past all our problems and find prosperity again.

What they're not so sure about, though, is exactly when all that will happen -- and whether they'll still be solvent when that recovery eventually comes.

The cost of playing it safe
Looking beyond my neck of the woods, nearly everyone at The Motley Fool has heard similar concerns. Investors young and old, rich and poor, experienced and novice -- everyone has fears, and everyone's looking for answers.

One Fool who's especially attentive to those worries is Robert Brokamp, our resident expert on retiring successfully. That's why he has devoted so much of this month's installment of his Rule Your Retirement newsletter to the recent troubles in the markets -- and how smart investors can take advantage of them.

Although Robert has a lot of useful knowledge of his own to give his subscribers, he also finds a wide array of outside experts to share their experiences with readers. Featured this month is asset manager and author Richard Ferri, who has more than 20 years of experience working with investors.

One of the things Ferri talks about is the special set of challenges that baby boomers face right now. For those on the leading edge of the baby-boom generation, many of whom have hoped to retire in the next few years, the market's declines couldn't have come at a worse time. Ferri has found that some of his clients have panic-sold stocks in favor of safer investments, even though they won't need to take money from their portfolios for several more years.

But with safe investments like Treasuries at ridiculously low yields, getting out of stocks entirely isn't the answer even for retirees. Instead, Ferri proposes focusing on generating enough cash flow from your portfolio to avoid the need to sell your stocks while they're down.

Shoring up your income
So how do you earn more from your investments? I've already talked about how traditional blue-chip dividend stocks are paying healthy yields, with many companies, such as Intel (NASDAQ:INTC) and Merck (NYSE:MRK), sporting payouts of 4% or more.

But you can also find different types of investments that offer even higher yields:

  • Real estate investment trusts have seen their prices beaten down so far that their yields are now extremely attractive, despite concerns about the future of real estate. Even top REITs like Vornado Realty (NYSE:VNO) and Simon Property Group (NYSE:SPG) have yields of 7% or more.
  • Similarly, royalty trusts tied to natural resources have also seen their shares slammed. Yet even though a long period of low energy prices could squeeze dividends lower, current yields on trusts San Juan Basin (NYSE:SJT) and BP Prudhoe Bay (NYSE:BPT) of 9% and 16% respectively give investors a fair amount of room for dividend cuts.
  • In the bond arena, payouts on high-yield bonds are attractive, even accounting for default risk. Even investment-grade bonds have good yields, with those of Altria Group (NYSE:MO) currently at 9%. In the junk bond arena, mutual funds give you much-needed diversification and help you avoid losing everything.

By themselves, all of these investments would involve substantial amounts of risk. But by carefully balancing these different asset classes with an eye toward risk tolerance, you can ensure a solid stream of income from your portfolio. Combining your portfolio income with payments from other sources, such as Social Security and pensions, can give you the assurance you need to retire with confidence.

The other side of the story
Younger boomers, on the other hand -- like Ferri himself -- have an opportunity their older counterparts don't. With more time before they need access to their nest eggs, they have the chance to revamp their portfolios and invest for one final 10-to-15-year push before they retire.

To see the rest of Ferri's interview -- including some specific advice on the actions younger boomers should take -- let me invite you to take a closer look at Rule Your Retirement. Although the service generally requires a paid subscription, you can see this month's entire newsletter, along with back issues and other useful resources, absolutely free with a 30-day trial.

For more on troubling trends for those approaching retirement, read about:

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.