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<\/p>\nWhen it comes to superannuation it’s a great idea to have a target in mind so you can have some comfort that you’ll be well looked after in retirement.<\/p>\n
Starting early brings with it the benefits of compound interest and can make what seems like a large savings task much more achievable.<\/p>\n
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Image source: Getty Images<\/p>\n
Savings currently falling short<\/p>\n
It’s true that, on average, people’s superannuation savings at age 60 fall well short of being able to generate the $80,000 per year in passive income I am looking at today.<\/p>\n
Figures from the Association of Superannuation Funds of Australia show that men aged 60-64 have on average $395,852 in superannuation while women have $313,360.<\/p>\n
So, how much would you need in your super to generate $80,000 per year in passive income?<\/p>\n
Let’s do the sums.<\/p>\n
If you were able to generate a 10% average dividend yield on your investments, which would be a difficult task, you’d need $800,000 in superannuation.<\/p>\n
If you were getting just a 5% return, you would need double this, at $1.6 million.<\/p>\n
I would argue that with the benefit of franking credits<\/a>, retirees can aim for a return somewhere in the midpoint. So, to generate $80,000 from a 7.5% return, you would need to have $1.06 million in retirement savings.<\/p>\n Franking credits are crucial to this equation. If you invest in fully franked dividends, you get back all the tax the company has already paid.<\/p>\n This is because retirees are not taxed on their superannuation earnings.<\/p>\n In practical terms, this means a share paying a 5% dividend yield actually pays 7.14% once franking credits are included.<\/p>\n Which shares might help you hit the $ 80,000-per-year goal?<\/p>\n Infrastructure stocks such as APA Group Ltd (ASX: APA<\/a>) and toll roads operator Atlas Arteria Ltd (ASX: ALX<\/a>) pay healthy dividends of 5.36% and 8.86%, respectively.<\/p>\n In the resources sector, iron ore miner Fortescue Group Ltd (ASX: FMG<\/a>) pays 6.07%, Santos Ltd (ASX: STO<\/a>) pays 3.67%, and Woodside Energy Group Ltd (ASX: WDS<\/a>) pays 5.04%.<\/p>\n In the financial services sector, Regal Partners Ltd (ASX: RPL<\/a>) is paying 11.06%, Bank of Queensland Ltd (ASX: BOQ<\/a>) is paying 6.03%, and Westpac Banking Corporation (ASX: WBC<\/a>) is paying 4.39%.<\/p>\n How to check your progress<\/p>\n