To better meet the often competing needs of cash flow, investment growth and capital preservation, BMO Financial Group today announced the launch of BMO LifeStage Retirement Income Portfolios.

“As boomers approach retirement, they are often worried about the impact of market volatility on their investments — they don’t want to lose what they have worked so hard to save. They also want a predictable cash flow in retirement, but they are concerned that taxes and inflation may quickly erode their retirement savings,” said Mark Stewart, senior manager, product development and management, BMO Mutual Funds.

The portfolios feature principal protection through guaranteed capital distributions during the term and the payment of any residual balance at maturity.

The offer stable and predictable monthly cash flow indexed to inflation — investors receive monthly capital distributions that are adjusted annually for inflation to preserve their purchasing power.

The portfolios provide tax efficient capital distributions. There’s no tax on income or capital gains from underlying mutual funds, no tax on rebalancing of the portfolio and no tax on inflation adjustments.

The portfolios offer exposure to the growth potential of a diversified portfolio of leading BMO Mutual Funds, and a lifecycle approach to asset allocation. Asset mix systematically becomes more conservative as the maturity date approaches to reduce market risk

BMO says there has been significant demand for guaranteed product offerings like principal protected notes, segregated funds and guaranteed lifecycle funds. However, not many guaranteed products offer cash flow options for investors. “Our new offering represents the next phase of lifecycle investing – which began with our popular BMO LifeStage Plus Funds — by providing a cash flow solution for investors preparing for or entering their retirement years,” said Stewart.

BMO LifeStage Retirement Income Portfolios are notes providing exposure to the growth potential of the following professionally-managed mutual funds: BMO Dividend Fund, BMO U.S. Equity Fund, BMO International Equity Fund, BMO Bond Fund and BMO T-Bill Fund.

Additional features include:

  • Minimum capital distributions of 6% per year (payable monthly);
  • Guaranteed capital distributions until the principal amount is repaid;
  • Annual inflation adjustment;
  • No tax payable until disposition or maturity;
  • Maximum annual fee of up to 2.25%; and
  • $5,000 minimum investment.

There are three different versions of the portfolios: Current Pay (15 year term); Deferred 5 Year (20 year term); and Deferred 10 Year (25 year term).

The portfolios are only available at BMO Bank of Montreal branches.