£17,365 in savings? Here's how I can use it to target a £6,700-a-month income

I am always interested in finding new ways to make a solid income. I love the idea of ​​earning a steady income without lifting a finger.

The problem is that most passive methods fail the first test. Most of them that I have seen require a lot of time and effort not just in the beginning, but throughout the life of the effort.

So I continue to believe that investing in stocks, investment trusts, and exchange-traded funds (ETFs) are the best ways to make a second income over time.

The average savings pot in the UK is £17,365, according to Money.co.uk. Here's how I can invest it for maximum returns during retirement.

Getting started

The first thing I can do is open a tax-saving Stocks and Shares ISA or Self-Invested Personal Pension (SIPP). I can invest £20,000 in an ISA each year, and 100% of my annual salary – up to £60,000 – in a SIPP.

Over time, these products will bring me a fortune in taxes. The Office for National Statistics says that ISAs saved their owners a total of £6.7bn in the last tax year alone.

Please note that tax treatment depends on the individual circumstances of each client and may change in the future. The content of this article is provided for informational purposes only. It is not intended to be, and does not constitute, any form of tax advice. Students are responsible for conducting their own due diligence and obtaining professional advice before making any investment decisions.

Next, I will aim to fill out my portfolio with a diverse selection of 10-20 stocks, spanning various industries and regions. This strategy minimizes risk, and would allow me to (hopefully) make smooth annual returns at all points in the economic cycle.

I also look for companies that trade at attractive valuations. Those who trade at a premium can easily share price corrections when things go wrong.

FTSE 100 stock

Legal and General Group (LSE:LGEN) is another FTSE 100 I would definitely consider sharing. The company provides financial products and services worldwide, including insurance, pensions, asset management, and futures.

I believe it has significant potential to increase profits from this point forward. The number of elderly people in its markets is growing rapidly. Increasing concerns about pensioner benefits are also driving demand for personal investment products.

Against this backdrop, Legal & General expects its operating profit to grow at a compound annual rate of 6-8% through 2028.

On the other hand, Legal & General may struggle to grow revenue in the near term if broad consumer spending remains weak. It also has to row very hard to succeed in what is a very competitive market place.

However I believe these risks may be factored into Legal & General's share price. With a dividend of 229.6pa, it trades at a lower than forward earnings ratio (P/E) of 10.6 times. Meanwhile, the yield for the year 2024 stands at 9.3%.

Income £2,882

Using Legal & General's yield of 9.3%, I would expect to make an income of £1,615 this year. And if dividends stay the same – and the share price doesn't move – over 30 years my £17,365 will turn into £279,695 if I reinvest my earnings. Of course, that is not guaranteed.

But if I increased my initial investment by another £300 every month, I could end up with £864,476 after 30 years. At this point I would be earning an annual income of £80,396, or £6,700 a month. This would be more than enough to help me enjoy a comfortable retirement.