For those aiming for an early retirement and substantial passive income, ASX shares could be the key.
Over the past 30 years, the market has boasted an impressive average total return of 9.6% per annum. This makes it a prime candidate for those seeking financial independence sooner rather than later.
Let's look at how ASX shares can pave the way to a comfortable and even early retirement.
Retiring early with enormous passive income
To begin our journey, it's important to understand the financial benchmarks for retirement.
According to Australian Super, a single household requires $50,207 per year for a comfortable retirement, while a couple needs $70,806. This affords regular leisure activities, meals out, holidays, premium private health insurance, home improvements, and ownership of a reasonable car.
For a more modest retirement lifestyle, the figures stand at $31,867 (singles) and $45,946 (couples). This affords occasional leisure activities, limited meals out, ownership of a basic car, small home repairs, one annual domestic holiday, and basic private health insurance.
Assuming the historical average total return persists, which is not guaranteed, investors can strategically leverage ASX shares to achieve these retirement goals.
With 6% dividend yields achievable with ASX shares, you would need the following investment portfolios to deliver the desired amount of annual passive income:
- Singles Comfortable – $837,000
- Couples Comfortable – $1.2 million
- Singles Modest – $530,000
- Couples Modest – $770,000
The good news is that history shows that it is possible to grow your investment portfolio to these levels. By consistently investing in a well-diversified portfolio of ASX shares, individuals can harness the power of compounding and capital appreciation. Reinvesting dividends and staying committed to a long-term strategy can expedite the journey to early retirement with substantial passive income.
For singles, starting with $10,000 and then investing $10,000 per annum would turn into $840,000 after approximately 22 years if it generated an average annual return of 9.6%.
For couples, starting with $10,000 and then putting $14,000 into the market each year would get you to $1.2 million over the same period.
And for a modest retirement, you could achieve the desired level of passive income in approximately 18.5 years by investing the same amounts.
