Having a good handle on how much in superannuation savings you need to generate the sort of income you want to fund your retirement is a good strategy.
The sooner you start planning, the sooner you can reap the benefits of compound interest.
Today I'm looking at how much you'd need to have saved to generate $1,000 a week, or $52,000 a year, in income.
This level is slightly below the level of income the Association of Superannuation Funds of Australia (ASFA) says is necessary for a comfortable retirement.
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How much do you need for a comfortable retirement?
ASFA has pegged this at $56,166 for singles or $78,998 for couples, but keep in mind they assume the retiree owns their home and draws a part pension.
This so-called comfortable retirement would include the ability to hold top-level private health cover, own and maintain a reasonable car, and travel occasionally.
How much would you need in retirement to generate $1,000 per week?
If you are earning 5% on your superannuation savings, you would need $1.04 million. That drops to $520,000 if you earn 10%.
I would argue that, with the benefit of franking credits, a retiree could comfortably aim for a dividend stream returning about 7.5%. This would mean you would need about $693,333 in superannuation to generate $1,000 per week in income.
Franking credits pay back the tax a company has already paid to the shareholder – 30% in the case of fully franked dividends.
Given retirees don't pay tax, they receive this amount back in cash.
This means a 5% fully franked dividend becomes a "grossed-up" 7.14% dividend yield for retirees.
Which shares have strong dividend yields?
Plenty of companies deliver solid dividend yields.
In the property sector, Arena REIT (ASX: ARF) is currently paying 9.03%, Centuria Office REIT (ASX: COF) is paying 11.7%, and Cromwell Property Group (ASX: CMW) is paying 8.57%.
In the financial services sector, Regal Partners Ltd (ASX: RPL) is paying 12%, Bank of Queensland Ltd (ASX: BOQ) 6.01%, and Prime Financial Group Ltd (ASX: PFG) 8.6%.
Toll roads operator Atlas Arteria Ltd (ASX: ALX) recently reiterated its dividend payout and is currently delivering a yield of 8.98%.
What if your superannuation is falling short?
If your superannuation could use a top-up, it's worth exploring concessional contributions.
Up to a cap of $32,500, which includes your employer's superannuation contributions, you can make extra contributions into your retirement savings at a tax rate of 15%.
