BOSTON (TheStreet) -- The core tenet of retirement savings has always been to tolerate higher risk at a younger age to maximize accumulation and shift away from equities the older you get. Sticking to that game plan -- given the hit 401(k) plans and IRAs took during the recession -- may be easier said than done.

Those living on fixed incomes, or preparing to do so, have numerous reasons to worry about whether their savings will be sufficient. Low inflation may mean increased buying power, but for retirees it also means that in 2009 Social Security benefits didn't see a percentage increase for the first time in 35 years. The Federal Reserve's decision to keep interest rates low may benefit mortgage borrowers, but it also leaves seniors with little to no returns from the safe they have traditionally been steered toward, such as certificates of deposit and money market accounts.

With life spans increasing and many retiring baby boomers entering their fixed income phase with credit card debt, children's tuition bills and mortgages, the temptation is for them to increase their investment risk to maximize what may be inadequate distributions.

"More people are making the decision to take on some additional risk and be in equities because they feel like there is more upside," says Dean Kohmann, Charles Schwab's ( SCHW) vice president of 401(k) plan services. "Boomers and people who are nearing or in retirement are in a very difficult spot with the current interest rate environment."

The recently released MetLife Retirement Readiness Index found that 46% of respondents who are still working will delay their planned retirement age. That corresponds to 52% of respondents who said they are behind in their savings goals; only 28% said they consider themselves to be "on track." Prolonging one's working life, or picking up a new job, are increasingly considered options to ensure a more adequate income stream.

"Only a third of people who say they would like to do some type of work when they retire have explored alternate careers, and still fewer, 10%, have focused on their employment prospects," says Sandra Timmermann, director of MetLife's ( MET) Mature Market Institute.

Kohmann warns about over-reacting to the "market roller coaster." Emotions follow the movement in the market, but good investing is rarely about having an all-or-nothing attitude.

Determining the level of risk you're comfortable with is incredibly difficult and sometimes is revealed only during rough times, he adds. As a general rule, if you can't sleep at night because you're worrying about your investments, then you're probably taking on too much risk, even if the move was part of an intentional or reactive strategy.

An option retirees may also consider is to postpone Social Security benefits. Delaying benefits from the standard eligibility age of 62 to 70, for example, will result in a high monthly payment.

There is also a provision that allows individuals already collecting Social Security to undo the collection of benefits. A retiree can claim Social Security at age 62, halt payments and reclaim at age 70, and receive a higher benefit, provided they pay back the money previously received. That could produce as much as $14,000 more a year as payments are spread out in accordance with life expectancies. In essence, the claimant is a borrower required to pay back only the principal.

For retirees who do decide to plunge back into equities, they might do well to structure their portfolio around dividend-paying stocks. Stock prices can still plummet and dividend yields can be slashed and eliminated, but the quarterly income stream, in a low-interest rate environment, can be more profitable than traditional "cash" strategies.

Interest rates for six month CDs, on May 26, were 1.04% with one-year CDs doing only slightly better at 1.3%. Money market and savings accounts were both below 1%. The 10-year Treasury yield has been 3.24% this week.

By contrast, the dividend yields of some stocks offered far better returns and might provide a worthwhile alternative. Verizon ( VZ) and AT&T ( T) have dividend yields of nearly 7%. Altria Group ( MO) offered 6.7% and B&G Foods ( BGS) returned 6.2%.

Other stocks with respectable, better-than-many- interest-rate dividend yields include Eli Lilly ( LLY), (5.9%); Bristol-Myers Squibb ( BMY), (5.6%); Barnes & Noble ( BKS), (4.8%); Kraft ( KFT), (3.9%); Heinz ( HNZ), (3.7%) and ConAgra ( CAG), (3.2%).

-- Reported by Joe Mont in Boston.


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