Maybe you are thinking that you'd like to retire within the next few years, or perhaps you are already in your golden years. One of your prime considerations should be how to generate income that also keeps up with inflation. Besides some of the traditional sources, such as 401k accounts or IRA's, defined-benefit or lump sum pension distributions, social security payments and part-time work, where can a retiree look?

Fixed Income

You won't find safety in U.S. government securities, although they are one of the safest investments that can be made. The current yield on a 10-year Treasury note is 1.86%, and it's dropping like a rock. With the Federal Reserve indicating that their goal is to keep interest rates low for the next three years, this trend will continue. An investment in bonds will barely keep pace with inflation.

Don't go to the bank either. The average CD rate right now is around 0.31%. The typical yield on a money market account is an equally paltry 0.4%. If you shop around on the Internet maybe you could squeeze out 1%, about the same as some municipal bonds.

Instead of looking at these sources for your fixed income, I recommend investigating two other sources as part of your retirement planning. 

Blue-chip Dividend Growth Stocks

The number one consideration should be companies that have a solid record of paying and increasing dividends on their common stock over the decades, and should continue to do so in the future based upon the current underlying fundamentals.

This approach has two primary benefits: the increase in payouts typically keeps up with inflation, and there is the chance that the stock price will appreciate as well. One risk here is a potential increase in the tax rate on dividends starting next year, based upon the "fiscal cliff" situation. That could reduce your overall return somewhat. 

The pharmaceutical giant Johnson and Johnson (NYSE: JNJ) has increased its dividend for 49 consecutive years. If the past is any guide, and usually it is for dividend growers, expect a continuation of that trend in the future. In just the past 10 years the company has tripled its payout. For every 1,000 shares, the quarterly income increased from $200 to $600. An added benefit was a 16% gain in share price.

Going forward, Johnson and Johnson appears capable of continuing to pay and increase its dividend. It has plenty of cash, low debt levels, and its payout ratio is a reasonable 75%. 

Another company with a stellar record of dividend growth is Coca-Cola (NYSE: KO). The beverage maker that owns the world's most recognizable brand has paid a dividend since 1920, and has increased it every year since 1962. In the last decade the payout grew by an average of 10% each year, more than keeping up with inflation. A 1,000-share investment would have resulted in payments rising from $100 to $255. In addition, the stock has appreciated by 62%.

The company should be able to keep increasing its dividend in the future. It is projecting solid future revenue and earnings growth rates, and it has plenty of cash and a payout rate around 60%, giving it plenty of room to maneuver.

The telecommunications provider AT&T (NYSE: T) recently announced a dividend increase. It has increased its payout every year for the last 29 years. A 1,000 share investment currently returns $440 per quarter, or about 62% higher than 10 years ago. In addition, the price has increased by about 16%. 

A potential negative is the relatively high payout rate. Can AT&T keep increasing its dividend? It recently announced a $14 billion investment plan to modernize its technology. Maybe this will help keep the cash flowing in (and then out to you). 

The consumer products company Procter and Gamble (NYSE: PG) also has a long history of increasing dividends. Every year since 1956 it has provided a larger payout than the year before. Over the last decade the dividend has nearly tripled, and the stock price increased by 57%. All-in-all this is a solid performer.  A 1,000 share investment currently provides $562 every three months. 

Can this continue in light of a recent slowdown in earnings growth? P&G has experienced this before and was still able to increase its dividend.


Energy Stocks

Companies in the energy industry also have the potential to keep providing increasing divided payments in the coming years, based upon the ongoing boom in domestic natural gas and oil production created by innovations in drilling technology. Those companies involved in the transportation and storage of fossil fuels tend to have higher yields than the traditional blue-chip dividend growers. They are collectively known as master limited partnerships (MLP). 

One to consider is Kinder Morgan Energy Partners LP (NYSE: KMP). This MLP yields about 6.2%. A 1,000 share investment presently provides $1,260 per quarter in dividends. Over the last decade both the payout and share price have more than doubled. 

Based upon consensus projections that the boom will continue, or even accelerate, KMP should continue to provide juicy payouts down the road. A risk here is if the government cracks down on the industry with even more regulation.

So I've given you a couple of places to look for those companies that can help ensure a comfortable retirement with income that keeps pace with inflation. Although there may be some uncertainty elsewhere, expect these stocks to provide stable, predictable, and increasing payouts that let you enjoy the golden years worry-free.

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