Not enough income to retire? Dividends can help

Current financial conditions have left many investors strapped for cash in retirement, but dividends and dividend-income strategies might be able to help.

During the financial crisis and the Great Recession, retirement planning went off the radar screen for many Americans. The Employee Benefit Research Institute's 2014 Retirement Confidence survey revealed that only half of workers older than 55 have saved $50,000 for retirement. As a result, many of those individuals might find themselves working until age 70 in order to claim deferred Social Security benefits, which could be as much as 32% higher than the benefits payable upon retirement at age 65.

During the age of quantitative easing, savers have been punished by ultra-low interest rates. Many have resorted to a "search for yield," which could turn out to be a recipe for disaster. Although the conventional wisdom has been for retirees to rotate their investments into bonds, by the time that the Fed finally "normalizes" interest rates, the Grim Reaper may have already arrived for many.

Another alternative involves investing in dividend-paying stocks, which can offer income and help offset the impact of inflation.

In order to qualify as a dividend recipient, the investor must own the stock on the stock's ex-dividend date. Selling the stock on the next day does not disqualify a dividend recipient. The ex-dividend date is announced on the declaration date (also referred to as the "announcement date"), when the amount of the dividend and the ex-dividend date are disclosed. As you can imagine, some investors keep such stocks on their radar and if a nice dividend is announced, the investor has until the ex-dividend date to make the purchase.

The universe of stocks that pay dividends offers many opportunities, and the most well-known group of dividend-paying stocks is called the dividend aristocrats, which have paid larger dividends every year for 25 years. These can be added to one's portfolio through exchange traded funds or individual stocks.

ETFs known for investing in the dividend aristocrats include ProShares S&P 500 Aristocrats ETF (NOBL) and the SPDR S&P Dividend Index ETF (SDY).

Individual stocks among the dividend aristocrats include household names like 3M, AT&T, Coca-Cola, ExxonMobil and Wal-Mart.

Another strategy to enhance dividend investing includes writing covered-call options on dividend stocks, which can add portfolio income. Covered calls are a conservative option strategy available in cash accounts, as well as in 401(k) and IRA plans. While this strategy takes some expertise and study, successful investors can attain significant additional income by using these techniques.

No matter how well off you are, everyone can use more income at retirement to combat the effects of inflation and longer-life expectancy. For people coming up short on income at retirement, dividend and covered-call option-writing are two strategies that could improve your cash flow. Whatever your personal situation, dividends and call options could make a difference in your golden years.

John Nyaradi is publisher of Wall Street Sector Selector, a financial media site and newsletter focused on ETFs and global financial analysis, which is a USA TODAYcontent partner offering financial news and commentary. Its content is produced independently of USA TODAY.