Australia has one of the best retirement systems in the world with superannuation. It can help Aussies build towards a monthly passive income target of $9,500 per month, or even more.
Superannuation comes with a number of benefits for individuals who work full-time, such as a lower tax rate on investment earnings. Plus, concessional (including the regular, mandatory) contributions are only taxed at 15% rather than at someone's normal tax rate (which could be 30% or more). In retirement, superannuation earnings could be taxed at 0%, depending on the size of the superannuation balance.
When you put all of that together, an individual can build significantly more wealth inside superannuation rather than outside of superannuation, with less of a tax headwind.
It's beneficial to build a passive income stream inside superannuation because less of the return is lost to tax each year. It's the net income (after tax) that investors can utilise. A lower tax rate in superannuation makes passive income more appealing.
Considering how every household's tax position may be different, I won't focus on the tax benefits for the rest of the article and just look at what it would take to unlock $9,500 of monthly passive income from superannuation.
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The required portfolio size
Receiving $9,500 per month equates to $114,000 annually. For a lot of people, that'd be a very welcome level of investment cash flow in 2026 to pay for life's expenses.
To receive that much in dividends, it depends on the dividend yield of the portfolio.
For example, with a 1% dividend yield, someone would need a portfolio size of $11.4 million. But with a 10% dividend yield, someone would need a portfolio size of $1.14 million. I wouldn't suggest a yield as low as 1% because that's not appealing, while a huge dividend yield may not be sustainable.
Higher yields may not see much payout growth. Inflation could eat away at the buying power of $114,000, so it'd be good to choose investments with rising payouts rather than flat payouts.
Let's look in the middle.
With a 5% dividend yield, an investor would need $2.28 million to generate the desired dividends.
With a 4% dividend yield, the superannuation portfolio would need to be $2.85 million in size.
If the dividend yield was 6%, the superannuation balance would need to be $1.9 million.
Finally, if the dividend yield was 7%, the portfolio would need a superannuation balance of $1.63 million.
What ASX dividend shares could provide those sorts of yields?
If I relied on passive income in retirement from ASX shares, I'd want to own ASX shares that have a history of growing or maintaining their payouts.
When it comes to the ASX shares I'm expecting to pay a yield of approximately 4% to 6% in FY27 (including any potential franking credits), I'd look at names like Rural Funds Group (ASX: RFF), Centuria Industrial REIT (ASX: CIP), L1 Long Short Funds Ltd (ASX: LSF), and Coles Group Ltd (ASX: COL).
ASX shares that could pay a dividend yield of more than 6% (including franking credits) in FY27 that I like, include MFF Capital Investments Ltd (ASX: MFF), WCM Global Growth Ltd (ASX: WQG), Charter Hall Long WALE REIT (ASX: CLW), Future Generation Global Ltd (ASX: FGG), Future Generation Australia Ltd (ASX: FGX), and PM Capital Global Opportunities Fund Ltd (ASX: PGF).
I'm a shareholder in a number of the above ASX shares, such as L1 Long Short Fund, MFF Capital and WCM Global Growth, because of my confidence in the reliability of the dividends.
By building up a superannuation balance, investors can unlock significant passive income of $9,500 or more per month.
