How much is needed in superannuation for $2,500 in weekly passive income?

Planning well ahead of time is a great strategy for superannuation, and having a goal to work towards can make it even more rewarding.

Aiming for a $2,500 per week passive income stream from your superannuation savings would give a comfortable retirement – at least as measured by the Association of Superannuation Funds of Australia, which estimates singles will need $55,923 per year to fund a comfortable retirement.

The amount you deem a comfortable retirement will depend on the sort of lifestyle you are after, but the ASFA standard, which assumes you own your own home, envisages the ability to pay for top-level health cover, to own and maintain a reasonable car, and to travel occasionally.

Superannuation by the numbers

So how much superannuation would you need to generate $2,500 per week, or $130,000 per year, in passive income?

For simplicity’s sake, I will assume that a retiree is living off of dividends and not drawing down any capital.

If this were the case, if it was possible to earn a 10% dividend yield – a lofty ambition – you would need $1.3 million in superannuation.

If you were earning 5%, that figure would double to $2.6 million.

I’d argue that, taking into account franking credits, a return of about 7.5% is a realistic proposition.

In this case, you’d need a superannuation balance of $1.73 million.

Stocks in focus

So, what sort of companies might pay dividends that would help hit the $2,500-per-week target?

Personally, I’m a fan of the funds in the Wilson Asset Management stable, including WAM Strategic Value Ltd (ASX: WAR), which pays a fully franked dividend yield of 5.6%, and WAM Active Ltd (ASX: WAA), which pays 6.98%.

Dividend-focused ETFs can be a good choice also, with Betashares Australian Dividend Harvester (ASX: HVST) paying 5.48% and the Global X S&P/ASX200 High Dividend ETF (ASX: ZYAU) paying 4.25%.

Universal Store Holdings Ltd (ASX: UNI) has also traditionally paid high dividends with a current yield of 4.97%, while among the miners Fortescue Ltd (ASX: FMG) is paying 6.09%.

And among the banks, Westpac Banking Corp (ASX: WBC) is paying 4.52% fully franked, while Bank of Queensland Ltd (ASX: BOQ) is paying 6.25% also fully franked.

How to boost your superannuation balance

If you’re a bit low on your superannuation at the moment, consider either salary sacrificing into your super, or making a concessional contribution.

This year, the concessional contributions cap has increased to $32,500, meaning you can contribute up to this amount and pay only 15% tax. However, keep in mind that the $32,500 level includes any contributions made by your employer and any salary sacrifice amounts.

The post How much is needed in superannuation for $2,500 in weekly passive income? appeared first on The Motley Fool Australia.

More reading

• 37 ASX shares going ex-dividend next week
• Another RBA interest rate hike could be just weeks away. Here’s what the big banks think
• CBA vs Westpac shares: Which is the best buy?
• 3 ASX dividend shares that pay their investors every single month
• How much passive income can I earn off my $800,000 superannuation balance?

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