When it comes to superannuation, we all aspire to achieve a level of retirement savings that supports a comfortable standard of living.
But what is a comfortable level of income?
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How much superannuation do you really need?
While it's relatively subjective, the Association of Superannuation Funds of Australia (ASFA) has run the numbers and arrived at a figure that they consider sufficient for both singles and couples to have a comfortable retirement.
This measure, which assumes you own your own home, includes the ability to pay for top-level private health insurance and doctor visits, fast internet, a reasonable car and associated maintenance, regular leisure activities and the ability to travel occasionally.
To afford this, singles would need to earn $55,923 in superannuation income, while a couple would need to earn $78,556.
Today I'm looking at the amount of superannuation savings needed to generate $6,000 per month, or $12,000 per year, well above the level considered comfortable for a single person.
So let's look at the numbers.
Just to get started with round numbers, if you can generate a 7.2% return from your superannuation savings, you'd need $1 million worth of investments.
While this might sound like a high return, remember that superannuation funds benefit from franking credits – in lay terms, they are paid back the tax already paid by a company on its earnings.
Meanwhile, if you generate just a 5% return on your investments, you'd need $1.44 million in superannuation savings, while if you were able to generate 10% returns, the figure drops to just $720,000.
I'd argue that a 7.5% return, the midpoint of these two, is a realistic return to target, for which you'd need $960,000 in superannuation savings.
Keep in mind that all of these figures are based on dividend returns only, and don't assume any share sales take place.
So, what shares could you buy to deliver such returns?
Recently I've been keeping my eye on the funds managed by Wilson Asset Management, which have been paying decent dividends.
Just this week the WAM Strategic Value Ltd (ASX: WAR) fund announced that it had increased its dividend, and would now be paying a yield of 5.9%, rising to 8.4% once franking credits were included.
WAM Active Ltd (ASX: WAA) also recently increased its dividend and is paying out an identical yield to WAM Strategic Value.
When it comes to operating businesses as opposed to funds, Regal Partners Ltd (ASX: RPL) is a good option, with broker Morgans forecasting the financial services company will pay out 8.1% for this year, followed by 6.9% and 7.8% in the following years.
Among resources stocks Fortescue Ltd (ASX: FMG) is paying a 6.59% yield while Woodside Energy Group Ltd (ASX: WDS) is paying 5.02%, both fully franked.
And among the ETFs, there is the Betashares Australian Dividend Harvester Fund (ASX: HVST), which is paying 7.3% grossed up, or including franking credits.
