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Investing in retirement: how to split your money by when you'll need it

Updated 1 October 2026

Investing works differently once your salary stops. While you were working, you added money every month and could sit through a bad year. In retirement you're taking money out, and a market fall hurts more when you have to sell investments to pay the bills.

The usual advice is to "get more conservative as you age". That's too vague to act on. A clearer way to think about it is to sort your money by when you'll need it, and invest each part to match.

Why the order of returns matters

Here's an illustration with made-up returns. Two retirees each start with $300,000 and take out $18,000 at the start of every year. Over ten years they get the same set of yearly returns, which average about 4%, but in a different order.

  • Retiree A has the two bad years first: -15%, then -10%, followed by 6%, five years of 8%, and two of 10%.
  • Retiree B gets the same returns in reverse, so the two bad years come at the end.

After ten years, Retiree A has about $162,500 left. Retiree B has about $246,800. Same returns, same withdrawals, and an $84,000 difference, because A was selling investments to fund withdrawals right after they had fallen.

You can't control the order of returns. You can control whether a fall early in retirement forces you to sell.

Sort your money into four parts

Part 1: your lifelong income floor

For most Singaporeans this is CPF LIFE, plus any pension or annuity, and it's money you don't have to manage day to day. Until payouts start, your Retirement Account earns at least 4% a year under a floor the Government has extended to the end of 2027, and once payouts begin they continue for life.

The higher this floor, the less your other money has to do. That's worth knowing before you decide how much risk to take elsewhere.

Part 2: money for the next one to three years

This is your emergency fund plus the spending you expect to take from savings in the next few years. It needs to be there in full when you need it, so it belongs in low-risk, easy-to-reach places.

MoneySense, the national financial literacy programme, says that if you have immediate needs you should use liquid, low-risk assets, and gives Singapore Savings Bonds as an example. These are issued by the Government, start from $500, and can be redeemed in any month without penalty. Fixed deposits and savings accounts also fit here.

Part 3: money for years four to ten

This money has a few years to recover from a fall, though not decades, so it can hold a mix of lower-risk and growth investments. Its job is to refill Part 2 as you spend it.

Part 4: money you won't touch for ten years or more

This is the part that can be invested for growth. MoneySense notes that a longer horizon gives you more time to ride out market swings and to benefit from compounding. It also says that your risk appetite is really about how much you can afford to lose.

Investments here can fall in value, sometimes sharply. That's acceptable only because Parts 1 to 3 cover the years in between.

Spread the risk

Whatever you hold in Parts 3 and 4, MoneySense's guidance is to diversify: spread your money across different investments and asset classes so they don't all move the same way at the same time. You may give up some gains, but you lower the chance of a large loss.

For a retiree, that also means not having too much tied up in one place. That includes your former employer's shares, a single property, or one fund you've held for 20 years.

How the parts work together

Each year, spend from Part 2. When markets have done well, move some gains from Part 4 into Part 3 or Part 2 to top them up. When markets have fallen, leave Part 4 alone and keep drawing from Part 2 while it recovers.

None of this depends on predicting the market. The point is to make sure a fall never forces you to sell growth investments at a low price to pay for groceries.

A few warnings

  • Be wary of any product that promises high returns with little or no risk. MoneySense says these may turn out to be scams.
  • Ask what each investment costs you in fees every year, and include those fees when you compare options.
  • Don't invest money from Part 2 because rates elsewhere look tempting.

In Budget 2026 the Government announced a new, voluntary CPF investment scheme offering a small number of simple, low-cost life-cycle products, due in the first half of 2028 or earlier, with details still to come.

Getting the split right

How big each part should be depends on your own CPF LIFE estimate, what you spend each month and how much of a fall you could live with, so it's different for every household.

If you'd like to see how your savings would split across the four parts, book a free retirement review. We'll look at what you already hold before talking about anything new.

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