How much do I need in my superannuation to earn $10,000 passive income every month?

Find out what it would take to unlock $120,000 per year in passive income.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

In Australia, superannuation is a popular tool to build wealth for retirement.

It's tax effective too, and you can also use your superannuation to build a passive income to live off in your retirement years.

But by investing your superannuation wisely, you will benefit from lower tax rates, compound growth, and then eventually a retirement lifestyle boosted by a tax-free passive income.

The question is, how much do you actually need in your superannuation to receive the passive income you want?

Let's break it down, using $10,000 per month as an example.

Numerous Australian dollar notes laid out.

Image source: Getty Images

How much superannuation do I need to earn $10,000 of monthly passive income?

First, you need to work out what $10,000 in passive income every month totals over the year. 

So, $10,000 x 12 = $120,000.

Then you need to divide your annual passive income by the dividend yield of your overall portfolio. 

For example, $120,000 ÷ 2% = $6 million (that's the portfolio size you'd need).

The only catch is that the answer varies depending on your dividend yield.

That means a super portfolio with a dividend yield of around 4% only needs to be half the size of one with a dividend yield of around 2% to generate the same level of passive income.

Which is good news because a $6 million superannuation balance is out of reach for the majority of Australians.

Ok, so how much do I need to earn $10,000 off a 4%, 5% or 6% yielding portfolio?

We already know what portfolio size you'd need to earn $12,000 per year (the equivalent of $10,000 per month) off a 2% yielding account.

But if your overall portfolio has a slightly higher dividend yield of around 4%, you'll need a balance of around $3 million to earn the same $120,000 per year in passive income.

If the yield of your portfolio is higher still, at around 5% for example, your balance would need to be closer to $2.4 million to earn the same dividend income.

For a 6% yielding portfolio, you'd need a superannuation balance closer to $2 million to earn the same amount again.

And so on…

You'd still earn $120,000 per year in passive income from each of these superannuation balance sizes.

I'm aiming for a 5% yielding superannuation portfolio, which ASX shares can I invest in?

To earn a $120,000 passive income off a 5% yielding portfolio, you'd need around $2.4 million saved. 

But note, if you want a portfolio yielding around 5%, it doesn't mean that every investment in your portfolio has to yield that level. It can be a combination that yields 5% overall.

These are my top picks.

Defensive shares like Telstra Group Ltd (ASX: TLS), Sonic Healthcare Ltd (ASX: SHL), Origin Energy Ltd (ASX: ORG) or Amcor PLC (ASX: AMC) are a solid choice for income-seeking investors. These all yield around the 5% to 6% level, at the time of writing.

Non-discretionary ASX consumer staples stocks are also naturally defensive, but many of them yield slightly less. Supermarket giants like Woolworths Group Ltd (ASX: WOW) and Coles Group Ltd (ASX: COL) can generate stable cash flow across all phases of the economic cycle. This translates to consistent dividends for shareholders. These shares pay around 3%, at the time of writing. 

Then there are your popular ASX mining shares. These are more cyclical, but such stocks usually rebound strongly during recovery. BHP Group Ltd (ASX: BHP), Fortescue Ltd (ASX: FMG) and Rio Tinto Ltd (ASX: RIO) are popular options. These yield anywhere between 3.5% and 6.5% at the time of writing. 

Motley Fool contributor Samantha Menzies has positions in BHP Group. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Amcor Plc and Telstra Group. The Motley Fool Australia has recommended BHP Group and Sonic Healthcare. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Superannuation

An older man wearing a helmet is set to ride his motorbike into the sunset, making the most of his retirement.
Superannuation

Is $1 million in superannuation enough for a $60,000 retirement income?

How you invest, withdraw and supplement your super can make all the difference.

Read more »

Piles of increasing coins on Australian $100 notes.
Superannuation

The average superannuation balance of Australians aged 65 in FY27. How does yours stack up?

And some tips if you're falling behind.

Read more »

Happy wife holding her hands on her husband's shoulders while both look at a laptop.
Superannuation

What Warren Buffett's investing style can teach superannuation investors

I think several of Buffett’s simplest investing principles translate particularly well to building wealth for retirement.

Read more »

Elderly senior couple counting funds on calculator.
Superannuation

3 stellar ASX dividend stocks to supplement your superannuation 

These are top picks for September.

Read more »

Two retirees enjoying each other's company on a pickleball court.
Superannuation

How much do I need in my superannuation to earn $200 a day in passive income?

To earn $200 a day in passive income, how much should my superannuation balance be?

Read more »

Elderly couple using laptop at home while drinking a cup of coffee.
Superannuation

How much superannuation do I need to retire with a $50,000 annual passive income?

Investing your superannuation in quality ASX dividend stocks can provide a reliable passive income stream during retirement.

Read more »

Couple on their laptop in their home kitchen.
Superannuation

What is the average Australian superannuation balance at age 60?

Let's look at the latest numbers and see how you compare.

Read more »

Hand putting coins in a glass jar that says retirement, with a retro alarm clock on the other side, and piles of increasing coins in the middle.
Superannuation

How much is needed in superannuation to target a $60,000 annual passive income?

Here’s what it takes for $60,000 of yearly dividend income…

Read more »