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BMO Launches Next Phase of Lifecycle Investing With Unique Cash Flow Product

With one in two Canadian boomers expected to live into their nineties, the average Canadian should be planning to fund a retirement that could last 20 – 30 years. This means most retiring boomers will still need to grow their assets while seeking tax-efficient income solutions in order to fund ongoing spending needs during their retirement years.

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.

“When it comes to funding their retirement, boomers and retirees ultimately need the following things: capital preservation, growth potential for their investments, inflation protection, tax minimization and dependable cash flow. Unfortunately, there aren't many options available to achieve all of these goals - that's why BMO LifeStage Retirement Income Portfolios can play a vital role in your investment portfolio,” said Stewart.

Key features of BMO LifeStage Retirement Income Portfolios:

  • Principal protection through guaranteed capital distributions during the term and the payment of any residual balance at maturity
  • 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.
  • Tax efficient capital distributions; no tax on income or capital gains from underlying mutual funds; no tax on rebalancing of the portfolio and no tax on inflation adjustments
  • Exposure to the growth potential of a diversified portfolio of leading BMO Mutual Funds
  • Lifecycle approach to asset allocation - asset mix systematically becomes more conservative as the maturity date approaches to reduce market risk

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.

How BMO LifeStage Retirement Income Portfolios Work
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 6.0 per cent 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 per cent
  • $5,000 minimum investment

There are three different versions of BMO LifeStage Retirement Income Portfolios:

Current Pay (15 year term)
Tax-efficient cash flow begins in year one with annual capital distributions of 6 per cent, indexed to inflation, and guaranteed until principal is repaid.

Deferred 5 Year (20 year term)
Tax-efficient cash flow begins in year six with annual capital distributions of 6 per cent, indexed to inflation, and guaranteed until principal is repaid. The annual inflation adjustment occurs during both the initial 5-year growth phase and subsequent 15-year distribution phase.

Deferred 10 Year (25 year term)
Tax-efficient cash flow begins in year eleven with annual capital distributions of 6 per cent, indexed to inflation, and guaranteed until principal is repaid. The annual inflation adjustment occurs during both the initial 10-year growth phase and subsequent 15-year distribution phase.

BMO LifeStage Retirement Income Portfolios are only available at BMO Bank of Montreal branches.

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Investments in BMO LifeStage Retirement Income Portfolios are not mutual fund investments. They are investments in principal protected deposit notes (the LifeStage Notes) issued by Bank of Montreal and will constitute direct, unsecured and unsubordinated debt obligations of Bank of Montreal. Changes in the value of the underlying funds will directly affect the returns payable on the Notes. It is possible that no return may be paid on the LifeStage Notes. Capital distributions are repayments of principal that will only continue until $99 per $100 LifeStage Note has been repaid to the holder, after which no further capital distributions will be made on the LifeStage Notes. This press release is for information purposes only and should not be construed as an offering of LifeStage Notes or investment advice. Please see the Master Information Statement and relevant Supplement for additional details on LifeStage Notes. Please visit any BMO Bank of Montreal branch or www.bmo.com/mutualfunds for more information.