Do you know how you'll finance your retirement lifestyle?
The average estimated weekly income for full-time Australian adult workers is $2,083.70 (or $108,352 per year), according to the latest Australian Bureau of Statistics (ABS) figures.
The financial rule of thumb is that you'll need around 70% of your pre-retirement yearly income (assuming you own your home outright with no mortgage) to maintain that same lifestyle when you retire. It's called the 70% thumb rule.
Around 70% of the average $108,352 annual income comes to $75,846.
This is what it'll cost for the average retiree to maintain the same lifestyle once they've quit working.
The most common way for individuals to finance that amount of money is drawing down their superannuation balance.
But it's not the only option.
Instead of steadily drawing down on your superannuation capital to cover retirement lifestyle expenses, what if you could earn enough passive income to cover your living expenses alone?
The best part is, you could use your superannuation balance to generate the income for you.
By investing your retirement savings, you're letting your total balance keep compounding, and when you move to the retirement phase, you can live off the income it generates instead.
Here's how it works.
How much do I need in my superannuation to generate $76,000 per year in passive income?
To work it out, you'll need to divide your annual passive income by the overall dividend yield of your superannuation portfolio.
But unfortunately, it's not quite as simple as it looks. The outcome varies significantly depending on what your dividend yield is.
The general rule is, as the dividend yield of your portfolio increases, the superannuation balance you need to earn the same passive income goes down.
But investments with a higher yield often come with higher risk.
So, you'll need to work out where your risk-reward balance is.
Break it down for me by yield. What do I need in my superannuation?
Let's look at mid-range dividend yields around 3% to 6%, as an example.
If your overall portfolio has a dividend yield of around 3%, you'll need a superannuation balance of around $2.53 million. That's because $76,000 ÷ 3% = $2,533,333.
Raise your yield closer to 4%, and you'd need a superannuation balance of around $1.9 million. Or in other words, $76,000 ÷ 4% = $1,900,000.
If your portfolio yield is a little higher, at around 5%, your balance will need to be closer to $1.52 million to earn the same amount.
Raise that to 6%, and you'll need around $1.27 million to earn the same $76,000 annual passive income.
Give me some suggestions of ASX shares which yield around these levels
There is a wide range of high-quality shares on the ASX that yield around these levels.
These are my top picks right now.
If your superannuation balance is on the higher side and you want less risk, you might be happy with a 3% yielding portfolio. ASX shares around this level include major blue-chip stocks like conglomerate Wesfarmers Ltd (ASX: WES) and dividend royalty Washington H. Soul Pattinson and Co Ltd (ASX: SOL).
For 4% yielding options, I'd look towards major blue chips in the mining or banking sectors. BHP Group Ltd (ASX: BHP), National Australia Bank Ltd (ASX: NAB), and ANZ Group Holdings Ltd (ASX: ANZ) all yield around the 4% level at the time of writing.
If you're happy to take on a little more risk for more reward, then you might want to consider 5% or 6% yielding shares. Again, there are lots of options. Some of my favourites are Woodside Energy Group Ltd (ASX: WDS), APA Group (ASX: APA), Transurban Group (ASX: TCL), Origin Energy Ltd (ASX: ORG), and AGL Energy Ltd (ASX: AGL).
A final note
Remember that not every ASX share in your portfolio needs to yield the same amount.
Ideally, you want a diverse portfolio of shares with varying yields to protect it from volatility and share price risk.
You also don't need to invest the whole sum in one go. Start with regular monthly investments and let compounding do some of the heavy lifting.
The post How much superannuation do I need to generate $76,000 per year in passive income? 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 Transurban Group, Washington H. Soul Pattinson and Company Limited, and Wesfarmers. The Motley Fool Australia has positions in and has recommended Apa Group, Transurban Group, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended BHP Group and Wesfarmers. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2026