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How much superannuation do I need to earn $1,000 per week in passive income?

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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.

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%.

The post How much superannuation do I need to earn $1,000 per week in passive income? appeared first on The Motley Fool Australia.

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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 Prime Financial Group. 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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