CMOs are liquid investments as the Bank has unconditionally undertaken to repurchase the bonds from individual investors should the need arise. With this guaranteed market, individual investors are able to make long-term investments, which offer better yield while knowing that they can liquidate the bonds if required.
As an investment strategy for retirement planning, investors can purchase bonds on a regular basis, and/or use the total monthly cash flows to purchase additional bonds, i.e. reinvest the income, to match their retirement age or beyond. The objective is to build up a portfolio such that at retirement, the monthly income from this portfolio can be used to pay yourself a monthly pension without spending the capital. This capital or “ nest egg ” can be used in the case of emergencies or passed on to your heirs.