How much would I need invested in the Vanguard Australian Shares ETF (VAS) for a comfortable retirement?

The Vanguard Australian Shares Index ETF (ASX: VAS) is the most popular exchange-traded fund (ETF) on the ASX. In this article, we’re going to look at if it’s feasible for someone to have a comfortable retirement owning VAS ETF units.

Owning ETFs can be very useful because they can provide useful diversification in a single investment.

The Vanguard Australian Shares Index ETF gives investors exposure to the S&P/ASX 300 Index (ASX: XKO), which are 300 of the biggest businesses listed in Australia. Its biggest five positions make up 32% of the portfolio. They are: BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), CSL Ltd (ASX: CSL), National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC).

Can VAS ETF fund a comfortable retirement?

The fund certainly ticks the diversification box. In terms of dividend income, the VAS ETF receives dividends over 12 months, and it distributes the money it has received every quarter.

According to Vanguard, the ETF currently has a dividend yield of 3.9%. This excludes the benefit of franking credits, which could be an after-tax bonus for some retirees. I’m not going to include it as a benefit in this article because everyone’s tax positions are different – the franking credits may be needed to offset tax charged by the ATO.

According to the AFSA Retirement Standard, a retired couple aged between 65 to 84 years old currently needs $72,148.19 per annum for a comfortable retirement, while a single person needs $51,278.30.

At a dividend yield of 3.9%, a couple would need $1.85 million invested in the VAS ETF while a single person would need $1.31 million invested. If investors can benefit from franking credits, and see minimal (or no) taxes, then those balance requirements would be lower.

Foolish takeaway

The VAS ETF is a good investment choice, with very low management fees. However, I think it’s worthwhile considering global shares to be part of a portfolio mix because of the stronger growth potential.

There are ASX dividend shares out there that can pay bigger dividend yields, which is the type of investment I like to regularly look at.  

The post How much would I need invested in the Vanguard Australian Shares ETF (VAS) for a comfortable retirement? appeared first on The Motley Fool Australia.

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More reading

• Here are the next distribution dates for your Vanguard ETFs
• If you own the Vanguard Australian Shares ETF (VAS), make sure you’re doing this
• 5 ASX ETFs to buy and hold for 10 years
• Selling your investment property due to land tax hikes? 5 ASX shares I’d buy with the proceeds
• Buy these ASX ETFs for a second income

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL. The Motley Fool Australia has recommended CSL. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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