How much is needed in superannuation to target a $9,000 monthly passive income?

The superannuation system may be the best way for Australians to generate passive income because of how dividend payments are taxed at much lower rates compared to normal individual tax rates.

Passive income received in superannuation in the retirement portion of life could be tax-free. Isn’t that appealing?

Readers may be wondering how much an investor would need to receive a large amount of dividends each year. Let’s take a look at the required amount for that goal.

$9,000 of passive income each month from superannuation

Getting $9,000 per month would be $108,000 each year. That’d be a very satisfactory amount for most Australians and could fund a comfortable lifestyle.

How large the nest egg needs to be to receive $108,000 per year essentially boils down to what the portfolio yield is.

For example, if someone’s portfolio had an average dividend yield of 5%, they’d need a $2.16 million portfolio.

But, if the average dividend yield was 7.5%, an investor would need a $1.44 million portfolio.

If the average dividend yield were 3%, then an investor would require a portfolio size of $3.6 million.

There are plenty of options when it comes to aiming for these sorts of yields. I’ll point to a few ASX shares below. I have invested in a number of the names below to create a diversified, strong portfolio with a good yield and still have compelling growth prospects.  

Which ASX dividend shares I’d buy

There isn’t one right answer when it comes to investing for passive income in superannuation.

But it’s true that a business with a lower dividend yield may be investing more of its earnings back into itself to drive more growth for shareholders.

Some of the impressive businesses with a lower dividend yield include Lovisa Holdings Ltd (ASX: LOV), Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) and Wesfarmers Ltd (ASX: WES). I expect pleasing compounding of the dividend payout over the next three to five years.

Some of the compelling ASX dividend shares with a dividend yield of around 5% are names like exchange-traded fund (ETF) WCM Quality Global Growth Fund (ASX: WCMQ), listed investment company (LIC) Long Short Fund Ltd (ASX: LSF) and industrial real estate investment trust (REIT) Centuria Industrial REIT (ASX: CIP).

Turning to the higher-yield options I’d consider, names that spring to mind include WCM Global Growth Ltd (ASX: WQG), Future Generation Australia Ltd (ASX: FGX), Future Generation Global Ltd (ASX: FGG) and WAM Microcap Ltd (ASX: WMI).

The post How much is needed in superannuation to target a $9,000 monthly passive income? appeared first on The Motley Fool Australia.

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• 2 ASX shares with dividend yields above 8%
• Australia’s minimum wage just rose 4.75%. Here is what it means for ASX consumer stocks
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Motley Fool contributor Tristan Harrison has positions in Future Generation Australia, Future Generation Global, L1 Long Short Fund, 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 Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Lovisa and Wesfarmers. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.