How much is needed in superannuation to target a $110,000 annual passive income?

Detailed summary

Superannuation could be the right tool to build significant passive income. The post How much is needed in superannuation to target a $110,000 annual passive income? appeared…

Superannuation is a great tool for Australians to save toward retirement and also enjoy the financial fruits in the golden years. It could be the tool to use to generate $110,000 of annual passive income.

Australia's retirement system allows us to save throughout our lifetime and benefit from the power of compounding over many years.

Employees receive mandatory superannuation contributions every month, with those contributions taxed at a lower rate (15%) than the marginal income tax rate of full-time workers.

Additionally, investment earnings inside superannuation are taxed at a lower rate during the accumulation phase, helping build towards a very healthy nest egg. In retirement, investment earnings may be taxed at 0%, depending on the investment balance.

With withdrawal rules that essentially stop people from accessing their superannuation money until they're in their 60s, it encourages long-term investing in what could deliver the most growth, which is why I choose to invest in shares in superannuation.

Receiving passive income inside superannuation can be very attractive with the lower tax rate. It's the income after tax that we can use, so losing less to tax in superannuation makes a lot of sense to me.

Everyone has a different tax position, so I won't mention tax for the rest of the article.

With that in mind, let's see what's needed for $110,000 of annual passive income.

Receiving dividends is very pleasing to me, as investments pay us money just for owning them.

Opening of the article, excerpted from The Motley Fool Australia. To read the rest, open the article on the publisher's site.