Have you seen this $450 billion?

That’s not exactly the kind of statement you’re going to see on the side of a milk carton anytime soon. And yet, for retirees and Baby Boomers nearing retirement, it’s important to know about this missing money.

This missing money isn’t from losses in the stock market. It isn’t from some financial fraud at a Wall Street bank. It’s the annual income lost by bondholders courtesy of today’s ultra-low interest rates. And, as we know, the Federal Reserve is looking to keep those rates low for another year and a half.

I’ve long been wary of bonds. They’re expensive. Over the past 10 years, bonds have outperformed stocks. As yields have fallen, their prices have risen. Yields are a pittance.

That’s a crisis for anyone looking for a secure source of income, whether they’re retired already or taking the steps to do so within the next few years.

There’s an alternative: dividend-paying stocks. While payouts from interest income have fallen $450 billion per year to around $1 trillion in interest income, dividends from stocks are back to their all-time highs set in 2007 of $825 billion.

What’s fascinating is that bond income is still falling an average of 3% per year while dividends are growing around 7%. If that trend continues, dividend payments will exceed bond income within two years.

Yes, over the short term, stocks are riskier than bonds. Make no mistake. But for anyone looking to invest for at least 10-years, dividend-paying stocks, especially those with a history of annual dividend increases, will outperform just about anything hands down.

Indeed, when it comes to seeing an investment compound in value, a 10-year time period is the bare minimum to show results. Investing in a basket of stodgy, blue-chip stocks like Coca-Cola (KO), McDonald’s (MCD), or Proctor & Gamble (PG), will likely see both capital gains and an increasing stream of income for simply owning shares.

Stocks are no bargain compared to where they bottomed three years ago. But any company that managed to increase its dividend over the past five years since markets first started wobbling is likely safe for the long haul.

Any company that’s cut a dividend payment in the past five years, however, is circumspect. Many financial companies slashed dividends in 2008, and many have yet to reinstate a meaningful cash payout.

Of course, one big caveat remains: the proposed changes in dividend taxation. As I’ve explained in an earlier blog, this will harm all investors. But when it comes to the dividend aristocrats, who make it a policy to increase their payouts each year, investors can still see their cash payments rising.

Don’t let low interest rates cause your investment income to go missing. For long-term retirement planning, invest in dividend-growth companies. If you can, re-invest shares along the way for an even bigger payout later.

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