As the first of the baby boomer generation begins to retire, individuals are going to be in for an unfortunate experience once they delve into their financial planning. Regrettably, a lack of saving, uncertainty regarding health care, and increasing life expectancies have created a situation where boomers may not be nearly as ready for retirement as they may have previously supposed.

The bad news first
There's simply no reason to sugarcoat a dire situation: Those born between the period 1946 and 1964 are going to have an extremely difficult time during retirement.

  • One-third of middle-income workers will run out of money after 20 years of retirement.
  • Almost two-thirds of workers making less than $30,000 per year will run out of money after 10 years of retirement.
  • Early boomers (ages 56-62) have a 47% chance of not having enough money to pay basic medical expenses, while late boomers (ages 46-55) have a 45% of coming up short.

The bottom line is that those planning on retiring shortly (or have already stopped working) just won't have enough money to sustain the type of lifestyles they are accustomed to. The financial collapse of 2008 certainly didn't help; not only did it wreak havoc on portfolios, but now it's made investors much more cautious about investing in stocks. Thousands of investors are sitting on the sidelines, wary of a double-dip recession, or too concerned about another downturn to get back in the game.

But with CDs and savings accounts yielding close to nothing, and the 10-year Treasury only paying 2.7%, there's only one real way to build wealth while providing you with income as well: buy dividend stocks.

How about some good news?
Dividend stocks have always been a popular investment among savvy investors, but during the high-flying days of the 1990s when tech and Internet stocks were all the rage, dividends lost their glamour. Average investors, however, have come back to the notion that dividends are one of the greatest ways to increase returns -- they have a proven track record of outperforming non-dividend stocks, and have accounted for much of the markets appreciation over the last 100 years or so. In fact, according to Ned Davis Research, from 1972 to 2009, $100 invested in S&P 500 dividend payers grew to $2,266, while $100 invested in non-payers actually dropped in value to $61. That's an astounding difference!

The good news today is that companies are sitting on record amounts of cash, and many of them are realizing that the best way they can return value to shareholders is to institute dividends. And it's tech companies, too -- Cisco Systems (Nasdaq: CSCO) has formally announced a plan to start paying dividends, while Microsoft is planning to issue debt to hopefully buy back shares or increase dividends. My foolish colleague Dan Caplinger just penned an article listing companies that just started paying dividends this year, among them are prestigious companies like Starbucks and Broadcom (Nasdaq: BRCM).

In addition to those just beginning to pay dividends, many companies have recently announced increases, which is an important point to consider when shopping around the market. Companies that have paid shareholders for many years and that continue to boost that dividend give you the best chance to achieve financial success and can definitely help you sleep at night. For instance, Cincinnati Financial (Nasdaq: CINF) recently paid a higher dividend, while Philip Morris (NYSE: PM), Monsanto (NYSE: MON), and Marsh & McLennan (NYSE: MMC) all announced plans to increase their next dividend payments. Yamana Gold (NYSE: AUY) recently said it would increase its dividend for the second quarter in a row!

Some of these companies have been dishing out dollars for decades. Cincinnati Financial has increased its payouts for 50 years -- every year! Others, like Monsanto or Yamana Gold, are somewhat newer to the game, but all are delivering great news to their shareholders.

Build a better retirement
Fixed-income instruments like bond funds are obviously an integral part of anyone's portfolio, especially for those that are retiring or are near retirement. However, unlike stocks, bonds can't offer both growth and income -- a combination that is truly essential for financial prosperity. If you're an investor who's too concerned about the market or too weary of another financial meltdown, it's totally understandable. But don't avoid the facts, mainly that dividend stocks offer great upside and can help you not only with income stability, but also with capital appreciation. Invest wisely, and start researching dividend stocks today.

Curious what the most popular dividend stock is? Click here to find out!

True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community.

Jordan DiPietro owns no shares above. Marsh & McLennan, Monsanto, and Microsoft are Motley Fool Inside Value selections. Starbucks is a Motley Fool Stock Advisor recommendation. Philip Morris International is a Motley Fool Global Gains pick. The Fool has a bull call spread position on Cisco Systems. Motley Fool Options has recommended a synthetic long position on Monsanto and a diagonal call position on Microsoft. The Fool owns shares of Microsoft and Philip Morris International. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.