All Australians deserve a comfortable and stress-free retirement. But unfortunately, many of us are increasingly pessimistic that our superannuation system will be able to provide this for us.
As most readers would know, superannuation is designed to deliver a nest egg that is large enough to at least partially self-fund a comfortable retirement. However, a recent survey from State Street Global Advisers found that confidence in superannuation is falling.
The survey asked a group of Australian savers whether they "expect they will have saved up enough to retire." Tellingly, only 25% of those surveyed in 2022 agreed. But in 2023, that number had fallen to 20%.
Further, the proportion of those asked whether they "are not confident they will be able to retire when they plan to" rose from 40% in 2022 to 50% in 2023.
Our superannuation system is great in my view. However, the results of this survey show that it is probably a good idea for most of us to build up a backup superannuation fund outside the retirement system. We can do this by putting together a portfolio of ASX shares outside our super fund.
After all, our super is mostly invested in ASX and international shares anyway. So making a backup super fund is only an extension of our super fund's original purpose. The upside of investing outside super is that our money isn't locked away until retirement age. We can start using the passive income from the dividends our ASX shares produce to start paying bills straight away.
But how would one build this second superannuation fund exactly? Well, here are five ASX dividend shares I would be comfortable starting with if I had $10,000 to spare.
5 ASX shares I would use in a backup superannuation fund
I would start with an ASX index fund, such as the Vanguard Australian Shares Index ETF (ASX: VAS). A fund of this nature holds all of the top 300 shares on the ASX. As such, it provides instant diversification as well as an immediate stream of dividend income.
An index fund like VAS also gives us the benefit of getting the return of the broader Australian share market, in case our stock-picking skills aren't up to scratch.
But then I'd turn to some individual shares. Telstra Group Ltd (ASX: TLS) seems like a good pick as well. Telstra is of course the largest telco on the ASX and in Australia. A huge swathe of the country uses Telstra's services for mobile access, NBN broadband connections or both.
Given how important these services are in the modern world, customers won't be easily persuaded to give them up, even if there is a recession. That makes Telstra shares, and the 4.5% fully-franked dividend yield they come with, a great pick for a backup superannuation fund.
Next, I'd turn to Transurban Group (ASX: TCL). This toll-road operator is another defensive company, thanks to its vast network of arterial roads across our capital cities.
Transurban has the right to periodically increase its tolls in line with inflation. That makes this company a highly defensive income payer too. You can expect a dividend yield of around 4.7% from Transurban shares today.
Looking for fully-franked income in retirement
The next stock I'd choose for a backup superannuation fund is Coles Group Ltd (ASX: COL). Coles is another business we'd all know. But again, I like this company for its inherent defensive nature.
We all need to eat, drink and restock our households regularly, regardless of the economic weather. So as long as Coles is one of the cheapest places to do so, it will be a successful company, and thus investment in my view.
Coles has caught my attention as a retirement stock thanks to its impressive run of dividend increases. Since its ASX listing in late 2018, Coles has been able to ratchet up its dividend income every single year. Today, you can look forward to a fully-franked 4.17% dividend yield from Coles shares.
The final share I'd place in a backup superannuation fund is Washington H. Soul Pattinson and Co Ltd (ASX: SOL). This investment house is another stock that instantly brings diversification to the table. It owns a vast portfolio of other assets, including major stakes in several ASX shares like TPG Telecom Ltd (ASX: TPG).
I love this company for its long track record of delivering impressive returns to investors. Its fully-franked dividend yield of 2.62% today might not look too impressive. However, consider that Soul Patts has managed to raise its annual dividend every single year since 2000. That's 23 years and counting.
Because of this impressive streak, I think this company makes for a phenomenal candidate for a backup retirement share portfolio.
