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.
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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.
