Superannuation is one of the best avenues that investors can utilise to invest and build wealth due to the lower taxation environment. It can also be a place to invest in assets that can unlock high passive income.
We don't necessarily need to be able t access the income immediately for it to be a good investment – it could be a great asset because of earnings stability and the more consistent returns that it delivers year to year.
Considering superannuation has a lower tax rate, there's less of a drag on after tax passive income returns compared to investments outside of super for a full-time working Australian.
Plenty of investors can invest in passive income assets through self-managed superannuation funds (SMSFs). Other super funds also offer the ability to invest in areas such as S&P/ASX 300 Index (ASX: XKO) shares – there are plenty of options within that index for income.
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How to generate $2,500 of monthly passive income from superannuation
Each investor's situation will be different, so there's no one-size-fits-all approach that I can outline to say what the net income would be. Therefore, I'll focus on the gross income, before taxes and costs.
Generating $2,500 of monthly passive income equates to $30,000 per year.
The amount required to be invested would depend on the dividend yield (or interest rate) of the investments.
For example, if someone had $1 million invested with a 3% dividend yield, that would generate $30,000 of annual income.
But, with a larger dividend yield, an investor wouldn't need as much in superannuation to create that same level of annual/monthly passive income.
For example, with a 4% dividend yield, an investor would need $750,000.
A 5% dividend yield suggests investors would need a $600,000 portfolio.
If the dividend yield were 6% then it would require just a $500,000 portfolio.
Where I'd invest for a high yield
If I were looking for investments to unlock a high level of monthly passive income, I'd focus on businesses with a good dividend yield.
I'd look at names like MFF Capital Investments Ltd (ASX: MFF), L1 Long Short Fund Ltd (ASX: LSF), WCM Global Growth Ltd (ASX: WQG), Charter Hall Long WALE REIT (ASX: CLW), Centuria Industrial REIT (ASX: CIP), Rural Funds Group (ASX: RFF), Universal Store Holdings Ltd (ASX: UNI) and Hearts and Minds Investments Ltd (ASX: HM1).
But, I wouldn't want to forget about somewhat lower-yielding businesses that have a track record of regular dividend growth as well as attractive capital growth.
