A $550,000 superannuation balance sits well above the typical Australian average for retirees, but it falls short of what you need for a comfortable retirement lifestyle.
It's the middle ground which can act as a solid base, but it's not quite enough to live off.
But what if you didn't need to live off your superannuation balance alone? What if your superannuation generated enough passive income to partially, or even fully, support you when you quit work?
So, how much passive income could a $550,000 super balance realistically generate each month?
Let's take a look.
What passive income can I earn off a $550,000 superannuation balance?
To calculate your passive income, you need to multiply your total superannuation balance by the overall dividend yield of your portfolio.
The tricky part is that the answer varies widely depending on what dividend yield you pick.
So, as your dividend yield increases, the passive income you can earn off your $550,000 superannuation balance also goes up.
Also note, the figures are based on cash dividends before any tax or franking credit benefits.
What can I earn off a 2% to 3% yielding portfolio?
If your portfolio yields 2% or 3%, you'll earn around $11,000 or $16,500, respectively.
That's because $550,000 x 2% = $11,000 per year in dividend payments, and $550,000 x 3% = $16,500 in dividends.
Around this level, you could invest in major long-standing ASX blue-chip companies like Commonwealth Bank of Australia (ASX: CBA), Wesfarmers Ltd (ASX: WES), CSL Ltd (ASX: CSL), or Macquarie Group Ltd (ASX: MQG). These all yield around the 2% to 3% level at the time of writing.
What can I earn if my portfolio yields around 4% or 5%?
If your portfolio has a slightly higher dividend yield, closer to 4% or 5%, you could earn a much higher dividend income of around $22,000 or $27,500, respectively.
There are still plenty of good-quality stocks yielding around this level. For example, mining giants BHP Group Ltd (ASX: BHP) and Rio Tinto Ltd (ASX: RIO). Major banks National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC) also yield around the 4% to 5% range. As do energy majors Woodside Energy Group Ltd (ASX: WDS) and APA Group (ASX: APA).
What if I want to invest my superannuation in high-yielding shares around 10% or even higher?
If you have the stomach to withstand the volatility and elevated risk, you could earn a much higher passive income from high-yielding stocks.
At a 10% yield, a $550,000 balance could earn about $55,000.
And there are still several options paying around this level too. If you're after a single stock, then GQG Partners Inc (ASX: GQG) and IPH Ltd (ASX: IPH) both yield above 11% at the time of writing.
Another option is to invest your super into an ETF like the BetaShares Australian Top 20 Equities Yield Maximiser Complex ETF (ASX: YMAX), the BetaShares Global Cybersecurity ETF (ASX: HACK), or the iShares S&P 500 ETF (ASX: IVV). These all yield 10% or higher at the time of writing.
The post How much passive income can I earn off a $550,000 superannuation balance? appeared first on The Motley Fool Australia.
Motley Fool contributor Samantha Menzies has positions in BHP Group. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended BetaShares Global Cybersecurity ETF, CSL, Macquarie Group, Wesfarmers, and iShares S&P 500 ETF. The Motley Fool Australia has positions in and has recommended Apa Group. The Motley Fool Australia has recommended BHP Group, CSL, Gqg Partners, IPH Ltd , Macquarie Group, Wesfarmers, and iShares S&P 500 ETF. 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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