How much do I need in my superannuation to generate a $108,000 annual passive income?

When it comes to retirement, there are several different metrics that you can use to work out how much you’ll spend, and therefore how much you need saved away in your superannuation.

But what if, rating than living off your superannuation balance, you could continue earning your working wage even after you retire?

According to the Australian Bureau of Statistics, $108,352 is the average full-time earning of Australians in 2026.

If you’re able to continue generating the same income level in your retirement years, then you’ll be able to live above and beyond a comfortable retirement lifestyle.

And it’s easier than you’d think.

If you invest your superannuation wisely you could generate a passive income in retirement on par with the average $108,000 Aussie wage.

But what would it actually take?

Let’s investigate.

How much do I need in my superannuation to earn an annual passive income of $108,000?

To calculate the amount of superannuation you need, you’ll need to divide your annual passive income by the dividend yield of your portfolio.

The only issue is that the answer varies depending on what that yield is.

The general rule of thumb is, as your yield goes up, the passive income you can earn off the same balance also increases.

This means that a portfolio with a dividend yield of say, 6%, only needs to be half the size of one with a 3% dividend yield in order to earn the same amount of passive income every year.

Break it down for me by yield

If your overall superannuation portfolio has a dividend yield of around 2%, you’ll need a balance of $5.4 million.

Obviously that’s a huge figure, and out of reach for many Australians. 

But remember, as your yield increases, the required balance goes down. 

If the yield of your portfolio is closer to 3%, your balance would need to be closer to $3.6 million.

For a 4% yielding portfolio, you’d need a balance closer to $2.7 million.

Raise it a little more to 5% and you’re looking at a balance of $2.16 million. That will still generate the same $108,000 passive income every year.

At a yield of 6%, your superannuation portfolio would need to be around $1.8 million in size.

It could then go down to around $1.54 million or $1.35 million for a 7% or 8% yielding portfolio, respectively.

I’m a little risk adverse, I’d be most comfortable with investing my superannuation into 4-6% yielding ASX shares. What are my options?

It’s a wise move.

It can be tempting to go for the highest yielding shares with the expectation that you could earn that same passive income off a much smaller balance. And it’s possible, but it’s a risky investment strategy.

Generally the higher yielding ASX dividend investments are associated with more risk. Investors might be faced with lower capital growth or a fluctuating income.

But a 4-6% yield is often considered to be the “sweet spot”.

It’s the middle ground between large, stable, low-growth ASX businesses, and high-growth volatile shares. 

Companies in this bracket could be some of the major banks, defensive infrastructure shares, or energy stocks. 

For example, Telstra Group Ltd (ASX: TLS), AGL Energy Ltd (ASX: AGL), National Australia Bank Ltd (ASX: NAB), ANZ Group Holdings Ltd (ASX: ANZ), Westpac Banking Corp (ASX: WBC), Transurban Group (ASX: TCL), and Origin Energy Ltd (ASX: ORG) and all yield around the 4-6% level, at the time of writing.

The post How much do I need in my superannuation to generate a $108,000 annual passive income? appeared first on The Motley Fool Australia.

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Motley Fool contributor Samantha Menzies 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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.