BMO Bank of Montreal has recently announced the launch of BMO Lifetime Cash Flow, an industry first product that allows Canadians aged 55 and over with a guaranteed cash flow for life.
This new product is a great addition to the suite of deposit products that comprise the BMO LifeStage Retirement Income Portfolios.
Retirement can last quite a while, especially when you consider the length Canadians live nowadays. What can happen is that people start to worry about the possibility of outliving their retirement savings. The BMO Lifetime Cash Flow product helps address the concern made by Canadians, as it introduces a guaranteed lifetime cash flow component that provides continuous payments for the rest of the product holder’s life.
How does the BMO Lifetime Cash Flow Work?
As I mentioned above, the BMO Lifetime Cash Flow is a product that allows retirees to have a guaranteed cash flow for the remainder of their life. BMO Lifetime Cash Flow is a bank deposit backed by the strength and stability of BMO and it is fully protected against the market volatility.
You can put as little as $5,000, and you can start building a personal pension for yourself. The initial deposit provides exposure to a portfolio of BMO Mutual Funds and is rebalanced annually to a progressively more conservative mix of funds over time. After 10 years, the product holder receives guaranteed cash payments equal to 6% per year, which are payable monthly based on the initial deposit. The return of the capital continues for the next 15 years. The deposit holder continues to receive 6% interest income paid by BMO on an annual basis. The best part of this product is that regardless of market conditions, this payment plan continues for the rest of the individuals life or as long as they hold the product.
A recent BMO survey conducted by Harris Decima found that 90% of Canadians believe that it is important to have a guaranteed source of income during retirement. Half of the respondents expressed their concern over having enough money to get hem through retirement. BMO has recommended that every Canadians have at least one source of retirement income guaranteed, and should ideally make up at least 30% of their overall cash flow.
Why would I need this product?
With this product plan it will make your retirement a lot better seeing as you will not have to worry about where you will be getting money to live. Keep in mind though that although having this product will definitely be an asset for your future, it may not be enough depending on the lifestyle you may want to live in your retirement. You should continue to make a saving account that is aimed solely to your retirement.
Ultimately, you will have less to worry about when it comes to your finances; you will be guaranteed to have a cash flow for the remainder of your life. What more can you ask for when you retire?
Having an income plan in place is essential to ensure a comfortable retirement.
Personally I find this to be a great product, and in a few years I am likely to start using the product. As it is now, I do not feel it is completely necessary for me, however you can never start too early preparing for your retirement.
image source: Jayson Ignacio