Can you imagine having an extra £3,000 a week in passive income? It’s a pretty attractive thought, and one that might be easier to achieve than you think.
The secret? A mix of saving cash and investing in the stock market. I’m not saying it’ll be easy. And positive returns are never, ever guaranteed. But with patience and a well crafted portfolio of dividend shares, an additional £3k in cash each month is a very realistic target.
Want to know how?
My plan
Let me start by telling you what I’m doing to target retirement wealth. I hold savings in a Cash ISA, and I have a shares portfolio spread across a Stocks and Shares ISA and a couple of Self-Invested Personal Pensions (SIPPs).
With these products, the interest, capital gains, and dividend income I receive is protected from HMRC. And so my cash and investment balances are larger, and I have 100% of my dividends available to reinvest. With the SIPP, I have the extra benefit of tax relief, too, giving me extra money to grow my portfolio.
But that’s just the starting point. How am I actually using these accounts to target retirement income? I’m roughly putting 80% of my extra cash each month in my investing ISA and SIPP, with the remaining 20% deposited in the Cash ISA.
Why this split?
My rationale is a simple one. I want to target the superior long-term returns of the stock market but without putting all of my money at risk. An 80/20 split is one I’m comfortable with.
But here’s something I do that a lot of unsuccessful investors fail to: I hold a diversified mix of 20-25 stocks, trusts, and funds. We’re talking about companies working in different industries and parts of the world, giving me access to various growth and income opportunities and spreading my risk still further.
Take this passive income share I’ve just bought: Aviva (LSE:AV.). Its one of the key holdings in my dividend portfolio alongside HSBC, Legal & General, and Coca-Cola HBC, to name just a few others I own.
I love Aviva for a couple of reasons. Its dividend yield consistently ranges between 5% and 6%, and for 2026 this sits at 6.5%. That’s more than double the FTSE 100 average of 3%.
But what makes it such a strong dividend payer? Its insurance premiums and asset management fees give it the cash flows to deliver large and growing dividends. Indeed, shareholder payouts have grown in 11 of the last 12 years.
Aviva faces significant competitive pressures across its product lines. However, a strong position in growing markets suggests the FTSE firm should keep delivering excellent returns.
Targeting that £3k monthly income
I’m confident the dividends Aviva pays me now will help me grow my ISA and SIPPs. When I retire, I’m hopeful it’ll give me a stream of cash to live on.
So how much money will I need for a £3,000 monthly income in retirement? Let’s say I can achieve a 9% annual return from my stocks and 2% on my cash holdings. Based on a £500 monthly investment split 80/20, I will have a total portfolio worth £483,353 in just under 26 years.
This could then make me £3k a month if invested in 7%-yielding dividend shares.
