How much superannuation is needed for $80,000 a year in passive income?

Earning $80,000 per year from your superannuation might seem an achievable goal, but it's worth noting that most people who are currently drawing down on their superannuation would earn nowhere near that.

The most recent figures from the Association of Superannuation Funds of Australia (ASFA) indicate that the median amount of superannuation for men aged 60 to 64 is just $236,126, while for women it's $174,655.

These numbers are well short of what they'd need to be to generate $80,000 per year.

That's not to deter you from aspiring to that goal; more so, it's a call to get planning early so that your goal can be achieved.  

So how much superannuation do you need to generate $80,000 per year?

When it comes to figuring out how much passive income you will receive from your superannuation, it pays to know what sort of return is realistic.

A good benchmark is the Vanguard Australian Shares Index ETF (ASX: VAS), which aims to track the return of the S&P/ASX 300 Index (ASX: XKO).

The VAS ETF has returned 8.95% per year over the past 10 years, made up of 4.31% in dividends and 4.64% in capital growth.

If you were aiming to generate $80,000 per year from a portfolio returning 8.95% per year, you would need to have $893,854 in superannuation savings.

Looking at the calculations from a dividends-only perspective, I suggest a return of 7.5% is achievable once franking credits are factored in.

Franking credits pay shareholders back a credit for the tax which a company has already paid on earnings, which for retirees who are paying no tax means a cash windfall.

In practice, it means a 5% dividend yield increases to a grossed-up amount of 7.14%.

If you are able to generate a 7.5% return, you would need a superannuation balance of $1.066 million.

As you can see, this is well above the amount most people have at age 60.

Which companies are worth looking into for dividend payments?

In terms of companies which might generate the sort of returns you're after, infrastructure can be a good place to start.

Gas pipelines company APA Group (ASX: APA) is paying a trailing yield of 5.15%, while toll roads operator Transurban Group Ltd (ASX: TCL) is paying 4.99%, and Atlas Arteria Ltd (ASX: ALX) is paying 10.78%.

Oil and gas major Woodside Energy Group Ltd (ASX: WDS) is paying 4.89% while Origin Energy Ltd (ASX: ORG) is paying 4.91%.

Among the listed real estate companies, Arena REIT (ASX: ARF) is paying 7.15% while HomeCo Daily Needs REIT (ASX: HDN) is paying 7.64%.

As you can see, there are various options in terms of shares that pay high dividends among well-established names on the ASX.

The post How much superannuation is needed for $80,000 a year in passive income? appeared first on The Motley Fool Australia.

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 positions in and has recommended Transurban Group. The Motley Fool Australia has positions in and has recommended Apa Group and Transurban Group. The Motley Fool Australia has recommended HomeCo Daily Needs REIT. 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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