$1,000 a week could make retirement look very different.
That is $52,000 a year arriving without having to go to work for it.
But how much superannuation would I actually need?
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It depends on the income your portfolio produces
The answer comes down to the income yield you expect from your investments.
If the goal is to generate $52,000 a year without regularly selling down the portfolio, I am going to need a substantial superannuation balance.
For example, with a 4% dividend yield across the portfolio, I would require a balance of approximately $1.30 million.
However, with a 5% dividend yield, the balance would fall to around $1.04 million, while a 6% yield would reduce the figure to about $867,000.
All examples are before considering any potential benefit from franking credits.
Why I wouldn't simply chase a big yield
It would be tempting to decide that $867,000 is all I need and just aim for a 6% dividend yield in retirement.
But I would be careful with that.
A very high dividend yield can sometimes be a warning sign. A company may be struggling, its dividend may be unsustainable, or the share price may have fallen because investors expect earnings to deteriorate.
For retirement income, I would prefer a portfolio built around businesses and funds capable of supporting their payments over many years.
That could include infrastructure shares such as APA Group (ASX: APA) and Transurban Group (ASX: TCL), property investments such as Charter Hall Long WALE REIT (ASX: CLW), and established companies such as Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW).
Dividend-focused ASX exchange traded funds (ETFs) could also help spread the income across a larger collection of businesses.
Growth still has a role
Even in retirement, I would not necessarily turn the entire superannuation balance into income investments.
Inflation does not stop when you retire. If the portfolio can continue growing over time, that can help the income stream grow as well.
A mix of ASX dividend shares, quality growth companies, ETFs, and defensive assets could therefore make more sense than simply trying to maximise the starting yield.
Foolish takeaway
I think targeting around $1.04 million would be a sensible starting target for someone hoping to generate $1,000 per week from a portfolio yielding approximately 5%.
The important part is building an income stream that has a good chance of still being there many years into retirement.
