To start with, it must be said that if you're able to achieve a $10,000 per month income stream from your investments in retirement you'll be firmly in the comfortable category.
As a guide, the Association of Superannuation Funds of Australia (ASFA) regularly publishes a figure for what people need to earn to be comfortable in retirement, with a few assumptions, including that they own their own home.
Should this be the case, a single can expect to have a comfortable lifestyle with an income stream of $55,923 per year ASFA says, while a couple would need $78,566 per year.
That said, how realistic is it to aim for $10,000 per month, or $120,000 per year?
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Let's run the numbers
Of course, that depends on how much you can afford to save during your working life, but it is also highly dependent on what dividend yield you can expect from your investments, as well as the contribution from franking credits.
Franking credits can be confusing if you're not well versed in how they work, but they're really quite simple.
A fully franked share is one that includes a credit for the 30% in-company tax already paid.
Retirees on a zero tax rate receive this amount back from the government as a refund.
For example, let's say you were paid a 5% fully-franked dividend. If you were a non-tax paying retiree, you'd get an effective dividend yield rate of 7.14%.
So how much in retirement savings do you need to generate $10,000 per month?
If you could achieve a dividend yield of 10%, the figure would be $1.2 million.
Naturally, if you were achieving a dividend yield of 5%, this would double to $2.4 million.
I'd argue a figure in between – a 7.5% yield – is realistic, meaning you'd need $1.6 million in retirement savings.
So what sort of shares would help you get there?
There are some shares and ETFs around that are specifically dividend-focused.
While the KKR Credit Income Fund (ASX: KKC) has been performing well recently, returning 9.82%, its dividend is unfranked.
The fund targets an average total return of between 6% and 8% through the business cycle.
WAM Active Ltd (ASX: WAA) has also been perfoming well, and recently announced a special dividend on top of its final dividend.
The fund said in a statement to the ASX that this would bring its fully-franked dividend yield to 8.6% and its grossed-up dividend yield to 12.3%.
Another fund in the Wilson Asset Management stable that has been performing well is its WAM Income Maximiser Ltd (ASX: WMX), which pays a monthly annualised yield of 7.1%.
There are also more traditional stocks, such as Fortescue Ltd (ASX: FMG), which pay out well, with the iron ore major having a trailing dividend of 6.5% fully franked, while Woodside Energy Ltd (ASX: WDS) pays out 5.19%.
