7 Criteria for Healthy and Sustainable Retirement Funds

Retirement planning in Singapore is a journey that requires foresight, strategy, and careful decision-making. For many, the starting point is the Central Provident Fund (CPF), which provides a basic income through CPF LIFE.

For years, many Singaporeans relied on the CPF SA with its 4% as the “gold standard” of safe returns. Now that it's gone, many retirees supplement this with other conservative instruments like T-bills, Singapore Savings Bonds (SSB), and fixed deposits.

While these options are considered safe, the reality is that their returns are often insufficient to sustain a comfortable lifestyle throughout retirement. Currently, yields are approximately:

(Accurate as of Aug 2025)

The reducing yield and interest rates can struggle to keep up with rising living costs and inflation over decades of retirement. For many retirees, relying solely on these instruments can result in income shortfalls, forcing them to either dip into capital, compromise their lifestyle, or take on unnecessary risk.

This is where healthy and sustainable retirement funds come in. By focusing on the right criteria, retirees can aim for a more reliable, inflation-beating, and sustainable income stream—without exposing themselves to excessive risk.

Regular Dividend Payouts

A key aspect of retirement planning is cash flow management. Regular dividend payouts are essential for retirees who need predictable income to cover monthly expenses such as housing, utilities, healthcare, and daily living costs.

Why regular payouts matter:

• Predictability: Retirement budgets are easier to manage when income comes in regularly. Instead of relying on occasional lump sums, monthly or quarterly dividends provide a steady and reliable flow of cash.

• Flexibility: Regular payouts allow retirees to reinvest some dividends while using the rest for living expenses, creating a balance between growth and income.

• Peace of Mind: Knowing that income will arrive consistently reduces stress and allows retirees to enjoy their retirement lifestyle.

A fund that pays dividends inconsistently—or not at all—can create uncertainty, potentially forcing retirees to liquidate other assets at inopportune times, which may lead to losses.

Stable or Growing Net Asset Value (NAV)

While dividends are the income component, the NAV represents the underlying value of the fund. A stable or appreciating NAV indicates a fund is well-managed and able to preserve capital over time.

Why NAV stability matters:

• Capital Preservation: Retirement funds are not just about generating income—they are also about protecting your initial investment. A fund with a declining NAV may put your principal at risk, even if it continues to pay dividends.

• Inflation Protection: A growing NAV helps ensure that the purchasing power of your retirement funds is preserved, so your lifestyle is not eroded by inflation.

• Confidence in Management: Consistent NAV growth or stability reflects prudent investment strategies and competent fund management.

Investors should be cautious of funds with volatile NAV trends, as large swings can indicate exposure to higher risk assets, which might not be suitable for retirees who prioritize income and capital preservation.

Consistent Dividend History

A fund’s track record of paying dividends reliably—and ideally increasing them over time—is a strong signal of financial health and management quality.

Why consistent dividends matter:

• Reliability: Retirees depend on income for daily expenses. A fund that has consistently paid dividends through market highs and lows demonstrates resilience.

• Growth Potential: Funds that gradually increase dividends signal strength and stability, potentially allowing retirees to keep pace with inflation.

• Peace of Mind: Knowing that the fund is committed to distributing income can reduce worry and provide a sense of security.

Before investing, retirees should look at a fund’s dividend history over multiple years or market cycles, ensuring that payouts are not just a one-off occurrence but part of a consistent pattern.

Target Annual Dividend Yield

Not all yields are created equal. While chasing higher dividends might seem attractive, extremely high yields can often be a sign of elevated risk or unsustainable payouts.

A healthy range: 4–8% per annum.

• Below 4%: May not generate sufficient income to meet retirement expenses, leaving a gap that needs to be funded from principal.

• Above 8%: Could indicate higher risk investments, which might jeopardize capital preservation or lead to volatile payouts.

Why the yield range matters:

• Income Adequacy: Ensures the fund can provide meaningful cash flow to support retirement lifestyle.

• Sustainability: Moderately high but not excessive yields suggest that the fund is generating income from reliable sources rather than taking on excessive risk.

• Balance: The 4–8% range strikes a balance between earning meaningful income and managing potential downside risk.

By targeting funds with this yield range, retirees can aim for a steady income stream without compromising capital.

Track Record of 10+ Years

Investing in a fund that has been around for at least a decade provides valuable insight into its resilience and reliability.

Why track record matters:

• Market Cycles: Funds that have survived bull and bear markets show they can handle volatility and adapt to changing economic conditions.

• Proven Strategy: Long-term existence reflects that the fund has a sustainable investment approach and has been able to generate consistent returns.

• Investor Confidence: Historical performance provides assurance that the fund is well-managed and credible.

For retirees, fund longevity is not just about past performance—it’s also a proxy for stability, which is crucial when relying on investment income during retirement.

Global or Diversified Portfolio

Diversification is a core principle of risk management. Funds that spread investments across multiple regions, sectors, or asset classes are better positioned to withstand market shocks.

Why diversification matters:

• Risk Reduction: Exposure to multiple geographies and sectors prevents poor performance in one area from dramatically impacting the fund’s overall returns.

• Smoother Returns: Diversified portfolios tend to show less volatility, making income streams more reliable.

• Opportunities for Growth: By participating in global markets, retirees can benefit from growth in multiple regions rather than being limited to one country or sector.

A fund heavily concentrated in a single market or sector may offer higher potential returns but comes with increased risk, which may not be suitable for income-focused retirees.

Currency Protection

For Singaporean retirees investing in foreign-denominated funds, currency fluctuations can erode returns. Funds offering SGD-hedged options help mitigate this risk.

Why currency protection matters:

• Stable Returns: SGD-hedged funds protect your income against foreign exchange volatility, ensuring your retirement income remains consistent.

• Reduced Risk: Fluctuating currency rates can unexpectedly reduce dividend income or capital value. Hedging reduces this uncertainty.

• Peace of Mind: Retirees can focus on spending and enjoying retirement without worrying about currency swings.

Currency risk may not be immediately visible but can significantly impact long-term retirement planning, especially for retirees relying on monthly payouts.

Bonus: Can you access these funds through a capital-guaranteed plan?

While the 7 criteria above help you evaluate the strength of a retirement fund on its own, there’s one additional factor that can significantly enhance its value to you and your family: whether the fund can be subscribed through a capital-guaranteed upon death plan.

Why is this important? When investing directly, your fund value fluctuates with the market. If something unexpected happens, your family could inherit less than what you originally invested. But if you access the fund through a capital-guaranteed structure, your capital is protected upon death — meaning your loved ones will at least receive back your total invested amount, regardless of market performance.

This “safety net” transforms the risk profile of the investment. It allows you to pursue growth through higher-quality funds without the constant worry of leaving your family exposed. Essentially, it combines the best of both worlds: market participation for upside potential, and guaranteed capital protection for peace of mind.

For retirement planning, this bonus feature acts like a protective shield. It’s not just about how much you can grow, but also about ensuring that your savings serve their purpose — securing your family’s future.

Understanding retirement funds and assessing which ones meet all seven criteria can be complex. Every retiree has unique needs, risk tolerance, and goals.

If you’d like to discover which funds currently meet these 7 criteria and could provide you with a sustainable retirement income, I invite you to meet with me for an Income Strategy Session to discover how income-generating strategies can help you grow your savings beyond bank rates — and work alongside your CPF LIFE.

A secure and comfortable retirement requires more than relying on CPF or traditional fixed-income instruments. By focusing on funds that offer the above criteria, retirees can better protect their capital, generate sustainable income, and maintain their lifestyle in retirement.