Accessing superannuation can seem like a long way off for many people, but the beauty of that is you've got plenty of time to prepare.
Starting early and reaping the benefits of compound interest are key to ending up with a superannuation nest egg that will furnish you with a comfortable retirement, but it's good to know what that actually means.
The Association of Superannuation Funds of Australia (ASFA) regularly publishes its retirement standard, which currently estimates that homeowners aged 65 and over now need $77,375 annually for a comfortable retirement as a couple, and $54,840 for a single.
Using our yardstick of $1500 per week, this would put a single person firmly in comfortable territory, which is measured by assessing the affordability of things like top-level private health insurance, a reasonable car, and the ability to travel occasionally.
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By the numbers
But how much in investments do you need to earn $1500 a week, or $78,000 a year?
Using a dividend yield of 5% per year, you'd need $1.56 million in your super to reap $78,000 a year, assuming there was no drawdown of capital.
So is 5% achievable? According to S&P Dow Jones, the S&P/ASX 200 Index (ASX: XJO) delivered an average trailing dividend yield of 4.15% from July 2011 to December 2024.
But this includes plenty of companies that pay low or no dividends. I'd argue it's quite possible to aim for a portfolio that delivers a dividend yield of around 5%, while also including some companies that pay a lot more.
You also have to take into account that for some retirees, superannuation earnings and distributions are tax-free.
Let's see how this affects the dividend payment of a company like Westpac Banking Corp (ASX: WBC).
Westpac pays a trailing dividend yield of 4.38%, according to the ASX website.
But Westpac has already paid 30% company tax on that dividend, which gets refunded to the retiree, boosting the dividend yield to 6.26%.
Aiming for income
There are also securities that aim specifically for a high dividend yield. One of these is the Australian Dividend Harvester Active ETF (ASX: HVST).
HVST aims "to exceed the net income yield of the broad Australian share market on an annual basis, paid monthly''.
Currently, its gross annual yield is running at 7.4%.
Another income-focused security is WAM Capital Ltd (ASX: WAM), which is currently paying a trailing dividend of 10.3%, 60% franked.
When it comes to companies, I've also recently written about three that are paying out better than 5%. These were AGL Energy Ltd (ASX: AGL), APA Group (ASX: APA), and Stockland Corporation Ltd (ASX: SGP).
At a 5% fully franked yield, the grossed-up yield increases to 7.1%, which would reduce the lump sum needed to generate a $78,000 yearly income to $1.09 million.
