Knowing with reasonable certainty how much income you can expect to draw from your superannuation in retirement makes it possible to approach this major life change with confidence.
Having a goal in mind and planning to hit that goal is essential, and the earlier you start, the better.
Aiming for $1,500 per week in retirement income will provide a comfortable retirement, at least as measured by the Association of Superannuation Funds of Australia, which estimates that singles will need $55,923 per year to fund a comfortable retirement.
This so-called retirement standard assumes you own your own home and will draw a part pension when you become eligible at age 67.
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How much do you need in superannuation to hit the $1,500 target?
But let's assume for the sake of argument that you are aiming to generate $1500 per week, or $78,000 per year, in retirement income from dividends alone, without drawing down on your invested capital.
How much you'll need invested to achieve this target depends on how much you can reliably expect to generate in terms of dividend yield.
If you are generating 10% a year – a lofty ambition and likely unsustainable – you'd need $780,000 in retirement savings.
If you were generating just 5% a year, you would need double this amount, or $1.56 million.
Considering that retirees get the benefit of franking credits on top of the base dividend yield from a share, as long as the share is franked, I'd argue that 5% is very much on the low side.
A goal of 7.5% is likely quite achievable and would require a superannuation savings amount of $1.04 million.
Which shares can generate sufficient returns?
There are a lot of shares you might consider that pay healthy dividends.
Infrastructure companies such as toll road owner Atlas Arteria Ltd (ASX: ALX) often pay strong dividends, with Atlas forecast by Macquarie to pay a yield of better than 8% out to FY28.
Rail freight operator Aurizon Holdings Ltd (ASX: AZJ) also pays a good dividend, currently running at 6.28%.
Real estate investment trusts also often have steady long-term businesses, with Waypoint REIT (ASX: WPR) paying a 7.19% dividend yield and HomeCo Daily Needs REIT (ASX: HDN) paying 7.78%.
And among the banks, Westpac Banking Corp (ASX: WBC) is paying 4.45% fully franked, while Bank of Queensland Ltd (ASX: BOQ) is paying 6.12% 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.
