Planning well ahead of time is a great strategy for superannuation, and having a goal to work towards can make it even more rewarding.
Aiming for a $2,500 per week passive income stream from your superannuation savings would give a comfortable retirement – at least as measured by the Association of Superannuation Funds of Australia, which estimates singles will need $55,923 per year to fund a comfortable retirement.
The amount you deem a comfortable retirement will depend on the sort of lifestyle you are after, but the ASFA standard, which assumes you own your own home, envisages the ability to pay for top-level health cover, to own and maintain a reasonable car, and to travel occasionally.
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Superannuation by the numbers
So how much superannuation would you need to generate $2,500 per week, or $130,000 per year, in passive income?
For simplicity's sake, I will assume that a retiree is living off of dividends and not drawing down any capital.
If this were the case, if it was possible to earn a 10% dividend yield – a lofty ambition – you would need $1.3 million in superannuation.
If you were earning 5%, that figure would double to $2.6 million.
I'd argue that, taking into account franking credits, a return of about 7.5% is a realistic proposition.
In this case, you'd need a superannuation balance of $1.73 million.
Stocks in focus
So, what sort of companies might pay dividends that would help hit the $2,500-per-week target?
Personally, I'm a fan of the funds in the Wilson Asset Management stable, including WAM Strategic Value Ltd (ASX: WAR), which pays a fully franked dividend yield of 5.6%, and WAM Active Ltd (ASX: WAA), which pays 6.98%.
Dividend-focused ETFs can be a good choice also, with Betashares Australian Dividend Harvester (ASX: HVST) paying 5.48% and the Global X S&P/ASX200 High Dividend ETF (ASX: ZYAU) paying 4.25%.
Universal Store Holdings Ltd (ASX: UNI) has also traditionally paid high dividends with a current yield of 4.97%, while among the miners Fortescue Ltd (ASX: FMG) is paying 6.09%.
And among the banks, Westpac Banking Corp (ASX: WBC) is paying 4.52% fully franked, while Bank of Queensland Ltd (ASX: BOQ) is paying 6.25% also fully franked.
How to boost your superannuation balance
If you're a bit low on your superannuation at the moment, consider either salary sacrificing into your super, or making a concessional contribution.
This year, the concessional contributions cap has increased to $32,500, meaning you can contribute up to this amount and pay only 15% tax. However, keep in mind that the $32,500 level includes any contributions made by your employer and any salary sacrifice amounts.
