So you want to make $3,000 a month through your investment returns. First, this is entirely possible and we have talked about even higher monthly comes such as making $5,000 and $10,000 even. How much you want to earn monthly depends on how you want to live your life. And $3,000 a month can still give you a very comfortable life.

Earning $3,000 a month on investment returns depends on a few factors. The biggest factor is, obviously, the amount of money invested. However, this depends on another subfactor known as the rate of return on the investment or the yield on the investment.

How much money to invest to make $3,000 a month?

Finding how much you need to invest is a pretty simple calculation. We backtrack from the monthly income.

How much to invest = ($3,000/yield)

Yield is the return on investment. For example, dividends received on your investment as a percentage is the number you want to substitute here.

If your investments have a return of 4% per annum, the formula is = ($3,000/4%*12). Mind you, the *12 is because the 4% return is per annum. The answer to this formula is $900,000.

That’s a pretty big number for anybody. Fortunately, this is where the subfactor comes to aid. You can reduce this number is by increasing the yield.

For example, same formula but this time we have a 6% return on investment per annum. So, ($3,000/6%*12) = $600,000. Just a 2% increase in annual return shaved off the investment required by a staggering $300,000, or reduced by 33%.

This formula works to calculate any monthly income goal you have. So, give it a try.

How much money to invest to make $3,000 a month at retirement?

So, nothing really changes about how much you need to invest to make $3,000 a month whether you invest right now or when you retire.

But one thing that does change is the ‘time’ you have until your goal. In this case, time really is money.

Usually, the value of money reduces with time thanks to a concept called inflation. However, you can beat this reduction in value with compounding returns. Basically, compounding returns are when you re-invest the dividends back into your portfolio. So, next time you earn a dividend, it will be dividends on dividends, too. This is the fastest way to grow your investments.

When you compound your returns through several years, the amount you have to invest out of pocket will reduce. The longer the time you have (or the earlier you start) the lesser will be the investment required by you.

Let’s assume we need $600,000 to make $3,000 per month on dividend income at a 6% yield per annum. If you want to earn this income now, you need to have $600,000 in hand to invest today.

But what if you started your retirement planning 10 years before. Check out the growth of your investment below.

Year	Investment	Annual Income on Investment
1	$356,000	$21,360
2	$377,360	$22,642
3	$400,002	$24,000
4	$424,002	$25,440
5	$449,442	$26,967
6	$476,408	$28,584
7	$504,993	$30,300
8	$535,292	$32,118
9	$567,410	$34,045
10	$601,455	$36,087

Had you started your retirement planning 10 years ago, you would have had to set aside only $365,000, a drastic difference from the investment needed today.

Just for reference, a $200,000 investment at 6% yield compounded annually, also would have grown to $605,000 by 20 years.

So, the earlier you start, the better it is for you to reduce the amount you need to invest out of your pocket to reach your retirement income goal.

So, we urge you all to begin your retirement planning process as soon as possible to take advantage of this compounding benefit.

Let us know what you think about this article in the comments below. What is your retirement income goal?