How much is needed in superannuation for $1500 in weekly passive income?

When you’re planning for your retirement, it’s great to start with a goal, and start as early as possible.

This ensures that you get the most benefit from compound interest on your savings, and can rest easy that you’ll be able to afford a comfortable retirement.

What actually is a comfortable retirement?

What constitutes a comfortable retirement is different for everyone, but a decent benchmark is the Association of Superannuation Funds of Australia’s (ASFA) retirement standard, which tallies up what it will cost for life’s essentials and a few other costs which make up a comfortable existence.

These include being able to afford top-level health insurance, reliable internet, owning and maintaining a reasonable car, and enjoying leisure activities and occasional travel.

The standard does assume however that the retiree takes a part pension from the age of 67, and owns their own home.

The standard is currently set at $56,166 per year for singles and $78,998 for couples.

The good news if you’re aiming for $1500 a week, or $78,000 per year in income from your retirement savings, is that this is comfortably above the retirement standard level for singles.

So what level of retirement savings would you need to generate this level of income?

If you were able to earn a 10% dividend yield on your portfolio, which I would argue is unlikely, you’d need superannuation savings of $780,000.

If you were earning just 5%, this would increase to $1.56 million.

I would argue that with the benefits of franking credits you’d be able to comfortably earn about 7.5% from dividends, meaning you’d need savings of $1.04 million.

Franking credits effectively pay a shareholder back a credit for the tax a company has already paid.

Given that retirees pay a 0% tax rate, this means the full 30%, for fully franked dividends, flows back to the shareholder.

In practical terms, a 5% dividend yield on a fully franked share becomes 7.14%.

Which shares deliver solid dividends?

In terms of companies that can deliver solid dividend yields, there are plenty to choose from.

Premier Investments Ltd (ASX: PMV) recently reported its full-year results. The retailer maintained its dividend, yielding 6.85%.

The Atlas Arteria Ltd (ASX: ALX) share price has slipped sharply recently, boosting its yield to 10.58%.

At the more blue-chip end, Westpac Banking Corporation (ASX: WBC) has a trailing yield of 4.39%, and Telstra Group Ltd (ASX: TLS) pays 4.36%.

As you can see there are plenty of options for shares which deliver a decent dividend yield.

And if you think your superannuation could use a top-up, it’s worth looking into non-concessional contributions, which can be a tax-effective way to increase your retirement savings.

The post How much is needed in superannuation for $1500 in weekly 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 positions in and has recommended Telstra Group. The Motley Fool Australia has recommended Premier Investments. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.