A $730,000 superannuation balance is the amount the Association of Superannuation Funds of Australia (ASFA) estimates an Australian couple needs at age 67 to fund a comfortable retirement.
It's the type of nest egg that many Australians strive for. They focus hard on building their balance, adding extra contributions where they can, and ensuring the super fund is performing well.
It's a solid strategy. But superannuation is more than just a savings post to draw money from when you stop working.
If invested wisely, it can also generate a passive income once you transition to retirement.
But how much passive income could a $730,000 balance realistically generate each month?
Let's take a look.
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What passive income can I earn off my $730,000 superannuation balance?
There is a simple calculation to help.
To calculate your potential passive income, you need to multiply your total superannuation balance by the overall dividend yield of your portfolio.
The tricky part is that the answer varies widely depending on what dividend yield you pick.
For example, $730,000 x 3% = $21,900 per year in dividend payments.
But if your portfolio has a slightly higher dividend yield of around 4%, your passive income will be higher. That's because $730,000 x 4% = $29,200 per year in dividend payments.
If your superannuation portfolio yields closer to 5%, you could earn $36,500 every year in dividend payments off the same superannuation balance ($730,000 x 5% = $36,500).
At a 6% yield, you could earn an annual passive income closer to $43,800, and at 7%, that could be even higher, at around $51,100.
And so on…
As your dividend yield increases, the passive income you can earn off your $730,000 superannuation balance also increases.
These figures are based on cash dividends before any tax or franking credit benefits.
I want to earn around $30k per year in passive income. What ASX shares could I invest in?
To earn around $30,000 per year in passive income off a $730,000 superannuation balance, you'd need a portfolio yielding around 4%. There is a huge range of good-quality ASX shares around this level.
Here are some of my top picks.
Defensive shares like Telstra Group Ltd (ASX: TLS), Transurban Group (ASX: TCL), or APA Group (ASX: APA) are a solid choice for income-seeking investors. These all yield 4% or even more at the time of writing.
Elsewhere, ASX bank stocks are also a popular choice. The big four major banks dominate the S&P/ASX 200 Index (ASX: XJO) by market capitalisation, and their defensive qualities means their shares are often able to bounce back in times of economic recovery. National Australia Bank Ltd (ASX: NAB), Westpac Banking Corp (ASX: WBC), and ANZ Group Holdings Ltd (ASX: ANZ) all yield around 4%.
Energy majors like Santos Ltd (ASX: STO), AGL Energy Ltd (ASX: AGL), and Origin Energy Ltd (ASX: ORG) are also a good option. They all yield 4% or higher.
What if I wanted to earn closer to $60k in passive income from my superannuation balance? What are my options?
To earn closer to $60,000 per year off the same balance, your portfolio would need to yield just over 8%. It's still possible, and there are many ASX shares yielding around this level.
But note that when it comes to investing your superannuation into ASX dividend shares, generally the higher the yield, the higher the risk associated with that stock.
If high-yielding shares are still what you're after, these would be my picks.
Your best bet would be to go for a listed investment trust or an exchange-traded fund (ETF) like the BetaShares Australian Top 20 Equities Yield Maximiser Complex ETF (ASX: YMAX) or the Metrics Income Opportunities Trust (ASX: MOT). Or if you're after a single stock, then GQG Partners Inc (ASX: GQG) and IPH Ltd (ASX: IPH) both yield over 8% at the time of writing.
