When it comes to retirement, wouldn't it be nice to get your feet up and make your money work for you?
Well, this certainly is possible. You just need to build an investment portfolio that has the potential to provide you with a suitable income.
On this occasion, let's aim for a retirement income of $50,000. Can we get there?
The good news is that if you have time on your side, history shows that growing a portfolio capable of yielding $50,000 a year in income is more than possible.
How to generate $50,000 of income from ASX shares
There are a large number of ASX shares out there that provide investors with 5%+ yields. This includes the likes of ANZ Group Holdings Ltd (ASX: ANZ) and BHP Group Ltd (ASX: BHP).
And while we don't know what they will offer in the ultra long term, you can bet that there will be something similar.
Something else you can bet on is the share market rising. Historically, the share market has provided investors with an average annual return of 10%.
There is no guarantee that this will happen again over the long term, but we're going to base our calculations on this.
With that in mind, if you were to invest $10,000 into the share market each year for the next 24 and a half years and earned the market return, you would have a portfolio valued at just over $1 million.
At that stage, you can switch your focus to income and if you average a 5% yield, you will be watching $50,000 come rolling in each year without lifting a finger. The dream!
The key is to build a diverse portfolio filled with high quality ASX shares and let compounding work its magic. Companies with strong business models, competitive advantages, and positive long term growth outlooks would be top of my list.
