How much is needed in superannuation to target a $3,000 monthly passive income?

The superannuation system is a wonderful way for Australians to build wealth because of how returns are taxed much lower compared to normal individual tax rates.

Passive income received in superannuation during the retirement phase has a good chance of being tax-free. How great is that?

So, the question is, how much would it take to receive a sizeable amount of dividends each year? Let’s take a look.

$3,000 of passive income each month from superannuation

Receiving $3,000 equates to $36,000 per year. That’s not a gigantic amount, but it could be enough to be an essential part of a retiree’s finances.

How large the nest egg needs to be to receive $36,000 per year is largely related to what the portfolio yield is.

For example, if someone’s portfolio had an average dividend yield of 3.6%, then they’d need a $1 million portfolio to receive $36,000.

But, if the portfolio average dividend yield was actually 7.2%, then an investor would only need a $500,000 portfolio.

If the portfolio had a 4.8% dividend yield then an invest would need a portfolio value of $750,000.

There are plenty of options when it comes to aiming for these sorts of yields, so I’ll highlight a few names below. For my own portfolio, I have invested in a mix of names to create a strong dividend portfolio.

Which ASX dividend shares I’d buy

If an investor is targeting a relatively low (3.6%) passive income yield in superannuation, or outside of superannuation, then I’d consider names like investment conglomerate Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), Kmart and Bunnings owner Wesfarmers Ltd (ASX: WES), global jewellery business Lovisa Holdings Ltd (ASX: LOV) and funeral provider Propel Funeral Partners Ltd (ASX: PFP).

Among the mid-range yield (around 5%) names, I appreciate listed investment company (LIC) L1 Long Short Fund Ltd (ASX: LSF), industrial property owner Centuria Industrial REIT (ASX: CIP), farmland landlord Rural Funds Group (ASX: RFF), telco Telstra Group Ltd (ASX: TLS) and quality global shares-focused exchange-traded fund (ETF) WCM Quality Global Growth Fund (ASX: WCMQ).

Some of the higher-yield (more than 7%) names that I like include LICs WCM Global Growth Ltd (ASX: WQG), MFF Capital Investments Ltd (ASX: MFF), WAM Microcap Ltd (ASX: WMI), and diversified property landlord Charter Hall Long WALE REIT (ASX: CLW).  

The post How much is needed in superannuation to target a $3,000 monthly passive income? appeared first on The Motley Fool Australia.

More reading

• Forget Westpac, these ASX dividend shares could be better buys
• Why Wesfarmers shares are a retiree’s dream for FY27
• Got $50k of savings? Here’s how I’d turn that into passive income of $10k a year
• How do ASX dividend shares compare to savings deposit rates today?
• Buy, hold, sell: Catapult Sports, Guzman Y Gomez, and Wesfarmers shares

Motley Fool contributor Tristan Harrison has positions in L1 Long Short Fund, Mff Capital Investments, Propel Funeral Partners, Rural Funds Group, Wam Microcap, Washington H. Soul Pattinson and Company Limited, Wcm Global Growth, and Wcm Quality Global Growth Fund. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Lovisa, Washington H. Soul Pattinson and Company Limited, and Wesfarmers. The Motley Fool Australia has positions in and has recommended Rural Funds Group, Telstra Group, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Lovisa, Mff Capital Investments, and Wesfarmers. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.