A $630,000 superannuation balance is the amount the Association of Superannuation Funds of Australia (ASFA) estimates Australians need at age 67 to fund a comfortable retirement.
It's the type of nest egg that many strive for and one that can support a comfortable lifestyle during their retirement years.
Many Aussies focus hard on building their superannuation balance, ensuring the fund is performing well and adding extra contributions wherever they can.
It's a solid strategy. But superannuation is more than just a savings pot to draw money from when you retire.
If invested wisely, your superannuation can also generate a passive income.
But how much passive income could the suggested $630,000 balance realistically generate each month?
Let's take a look.
Image source: Getty Images
What passive income can I earn off my $630,000 superannuation balance?
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, $630,000 x 3% = $18,900 per year in dividend payments.
And as your dividend yield increases, the passive income you can earn off your $630,000 super balance also increases.
The figures are also based on cash dividends before any tax or franking credit benefits.
Break it down for me by yield. What could I earn?
We already know what your portfolio can generate if it yields around 3%.
But if your portfolio has a slightly higher dividend yield of around 4%, your passive income will go up too because $630,000 x 4% = $25,200 per year in dividend payments.
If your superannuation portfolio yields closer to 5%, you could earn $31,500 every year in dividend payments off the same superannuation balance ($630,000 x 5% = $31,500).
At a 6% yield, you could earn an annual passive income closer to $37,800, and at 7%, that could be even higher, at around $44,100.
And so on…
Give me some options for ASX shares that yield around 4% or 5%
A 4% or 5% yielding portfolio on a $630,000 superannuation balance will earn around $25,200 to $31,500 every year.
That's a decent income, and there are a lot of quality high-yield ASX shares that yield around that level.
My top picks would be ASX blue chips like National Australia Bank Ltd (ASX: NAB), Rio Tinto Ltd (ASX: RIO), Fortescue Ltd (ASX: FMG), Woodside Energy Group Ltd (ASX: WDS), Bendigo and Adelaide Bank Ltd (ASX: BEN), or Medibank Private Ltd (ASX: MPL). These blue chips are highly reputable stocks that all pay out around 4% to 5%.
Alternatively, defensive stocks like Telstra Group Ltd (ASX: TLS), Transurban Group (ASX: TCL), APA Group (ASX: APA), and TPG Telecom Ltd (ASX: TPG) are a good option because they are able to maintain stable earnings through each part of the economic cycle. And stable earnings translate to a stable dividend payout.
And what about high-yield options closer to 8%?
There are some high-yield options that could fit the bill. A yield around this level on a $630,000 superannuation balance could generate around $50,400 in annual passive income, but it comes with additional risk.
If high-yielding shares are still what you're after, these would be my top picks.
Your best bet would be to go for an ETF like the BetaShares Australian Top 20 Equities Yield Maximiser Complex ETF (ASX: YMAX), BetaShares Global Cybersecurity ETF (ASX: HACK), or the iShares S&P 500 ETF (ASX: IVV).
If you're after a single stock, then GQG Partners Inc (ASX: GQG) and IPH Ltd (ASX: IPH) both yield above 8% at the time of writing.
