How much passive income can I earn off an $800,000 superannuation balance?

Here's a quick sum to work out what passive income you could earn off your superannuation balance.

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

Superannuation is a fantastic tool to help build wealth to live off in retirement. And an $800,000 balance will provide enough money to live comfortably when the time comes.

But you don't have to let it sit idly in the meantime.

Instead, you can invest your superannuation balance and generate a regular source of passive income for when you've stopped working.

But exactly how much passive income could a $800,000 superannuation balance generate each year?

Let's investigate.

Calculator next to money.

Image source: Getty Images

How much passive income can I generate from an $800,000 superannuation balance?

To calculate the potential passive income from an $800,000 superannuation balance, you need to multiply your total balance by the dividend yield of your portfolio.

It's a simple calculation, but the problem is that the answer varies depending on the yield of the stocks you pick.

For example, a 3% yielding portfolio needs to be twice the size of one that yields 6% to earn the same passive income.

Which also means that as your dividend yield increases, the passive income you can earn from your $8000,000 superannuation balance climbs higher. 

Here's a breakdown by yield. These figures are based on cash dividends before tax or franking credits

What can I earn from a 3% to 4% yielding portfolio?

If your superannuation portfolio has a dividend yield of around 3%, your passive income will be around $24,000 per year, because $800,000 x 3% = $24,000.

If your portfolio yields closer to 4%, your passive income could be closer to $32,000 every year ($800,000 x 4% = $32,000).

Major miners like BHP Group Ltd (ASX: BHP) and Rio Tinto Ltd (ASX: RIO) yield around this level. As do banking giant Commonwealth Bank of Australia (ASX: CBA) and conglomerate Wesfarmers Ltd (ASX: WES).

What passive income can I earn if my superannuation portfolio yields 5% or 6%?

If your superannuation portfolio yields closer to 5%, you could earn $40,000 every year in dividend payments off the same superannuation balance ($800,000 x 5% = $40,000).

At a 6% yield, you could earn an annual passive income closer to $48,000.

Classic dividend stocks like APA Group (ASX: APA), Transurban Group (ASX: TCL), and JB Hi-Fi Ltd (ASX: JBH) all pay around this level.

What about a portfolio yielding much higher, around 7% or 8%?

But if your portfolio has a slightly higher dividend yield of around 7% or 8%, your passive income will go up again to around $56,000 or $64,000, respectively.

Again, it's possible to buy shares around this level, but there are fewer options.

Solvar Ltd (ASX: SVR), Waypoint REIT Ltd (ASX: WPR), and HomeCo Daily Needs REIT (ASX: HDN) all pay around this yield at the time of writing.

Is it possible to invest in ASX shares yielding 10% or higher?

It's possible, but generally, the higher the yield, the higher the volatility and risk associated with the stock. 

If high yield and high risk are what you're after, at a 10% yield, a $800,000 balance could earn around $80,000.

You could invest in ASX-listed stocks such as Tower Ltd (ASX: TWR) or Kina Securities Ltd (ASX: KSL). Another option is to invest your superannuation in a high-yielding exchange-traded fund (ETF), such as the VanEck MSCI International Value ETF (ASX: VLUE) or the VanEck Gold Miners ETF (ASX: GDX). These all yield 10% or more 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 positions in and has recommended Transurban Group and Wesfarmers. The Motley Fool Australia has positions in and has recommended Apa Group and Transurban Group. The Motley Fool Australia has recommended BHP Group, HomeCo Daily Needs REIT, and Wesfarmers. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Superannuation

$50 Australian dollar note on top of a plant pot.
Superannuation

How much should I have in my superannuation at age 59?

How does your balance compare?

Read more »

Beautiful young woman drinking fresh orange juice in kitchen.
Superannuation

I'm planning to retire with $1 million in superannuation. How much passive income can I earn? 

Can I earn enough passive income to support a comfortable lifestyle from $1 million in superannuation?

Read more »

Australian dollar notes in the pocket of a man's jeans, symbolising dividends.
Superannuation

Superannuation has had a strong start to the year. See how much it's up already

Retirement savings are performing solidly.

Read more »

Senior woman relaxing in a hammock with an e-book on her tablet.
Superannuation

How much superannuation would I want if I planned to retire at 60?

I look at how retiring seven years earlier changes the amount of super I would want.

Read more »

Happy young couple riding a motorbike together.
Superannuation

How much do I need in superannuation to receive $1,000 passive income per week?

A monthly paycheck would be a very welcome thing.

Read more »

An older couple hug and smile in front of a motorhome.
Superannuation

How much superannuation is enough to retire with a $50,000 income?

Super targets vary wildly. It all depends on your Age Pension expectations.

Read more »

Senior couple looking at a laptop.
Superannuation

How much income could a $1.2 million superannuation balance generate?

I crunch the numbers to see how much retirement income this super balance could provide.

Read more »

Numerous Australian dollar notes laid out.
Superannuation

How much passive income could I earn from a $650,000 superannuation balance?

Your superannuation balance could contribute a handy additional passive income to live off in retirement.

Read more »