Interested in having a Locked-In Retirement Account (LIRA)?

Expert advice to find the best retirement solutions in Canada, without leaving the comfort of your home or office.

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Expert advice to find the best investment solutions without leaving the comfort of your home or office.

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What is a Locked-In Retirement Account (LIRA)?

A Locked-In Retirement Account or LIRA is an account meant for those who have an employee pension plan and leave their job. You have the option of transfer your pension plan savings into a LIRA, but you will not have access to the funds until you retire, hence it is locked-in. This is an appealing option to people who would like to strictly secure their savings for when they retire. The LIRA is also an attractive option for people who might need some assistance with keeping their money tucked away for only after retirement.

Find out if a LIRA is right for you!

What are the benefits of having a LIRA?

A LIRA can be a great savings account for those who are determined to have a strong retirement plan.

What is the difference between a LIRA and a RRSP?

LIRARRSP
What kind of savings account is it?
  • Retirement savings account
  • Retirement savings account
How to start the account?
  • Must be a Canadian resident
  • Must be 71 years old or under
  • Have an income
  • Contact us
How does tax affect this account?
  • Money won’t be taxed until it is withdrawn
  • Money won’t be taxed until it is withdrawn
  • Tax deductible to a certain limit
When can you withdrawal your money?
  • When you retire and turn the account into a retirement income account
  • Can make withdrawals anytime but they are taxable, and withdraw rules vary depending on type of account and legislation
How to contribute?
  • Cannot make contributions but can transfer funds from another locked-in account
  • Annual contribution limit, 2022 contribution limit is $29,210
What happens to the account when you retire?
  • Turn account into a retirement income account by the end of year that you turn 71 years old
  • Turn account into a retirement income account by the end of year that you turn 71 years old

Frequently Asked Questions (FAQs) About Locked-In Retirement Account (LIRA)

A LIRA is a locked-in account that will hold an employee pension plan from a former employer of yours. The funds in the account remain locked until your retirement, and must be transferred into a life income fund (LIF) to be accessed. You will rarely have access to unlock your locked-in retirement account, but it is possible in certain emergency situations.

It is honestly simple, the pension you’ve earned from a former employer is put into an account and is locked-in until you retire. When you retire you can transfer the amount in the LIRA into a life income fund (LIF) to receive your pension payments.

The minimum age that you can unlock your LIRA account is at age 71.

You can unlock up to 50% of your LIRA when you are 55 years old, or older in most provinces. You are also allowed to withdraw small amounts from your LIRA as long as it stays under a certain amount. Alternatively, in certain emergency situations you can withdraw money from your LIRA prior to retirement.

Once you turn 71 years old you can transfer your LIRA amount into a life income fund (LIF), this will then provide you payments from your pension throughout your retirement. 

There are indeed some ways that you can access the money in your locked-in retirement account. Most of these reasons would be due to emergency situations such as illness and loss of income. The rules do vary for each province, but to unlock locked-in retirement account in Ontario here are the rules directly from the Financial Services Commissions of Ontario: 

    • your life expectancy has been shortened to two years or less 
    • you are at least 55 years old and the total value of the funds in all of your locked-in accounts is less than 40% of the Year’s Maximum Pensionable Earnings (YMPE) 
    • amounts transferred into your locked-in account exceed federal Income Tax Act limits 
    • you are a non-resident of Canada and 24 months have passed since the date of your departure from Canada

There are some ways that you can access the money in your locked-in retirement account in British Columbia (B.C.). Most of these reasons would be due to emergency situations. The rules do vary for each province, but to unlock locked-in retirement account in B.C. here are the rules directly from the B.C. Financial Services Authority: 

    • Low income
    • Requirement to pay for medical cost
    • At-risk of eviction for rental arrears
    • At-risk of defaulting on a mortgage
    • Required to pay a deposit to obtain a new principal rental residence

The savings and investments aren’t taxed in the LIRA account but can be taxed when they are withdrawn from your LIRA, and transferred to a Life Income Fund (LIF). The tax won’t be deducted from your LIRA at once but rather you will be taxed on your scheduled LIF payments.

Yes, the funds in the locked-in retirement account can be used to invest in GICs, mutual funds, stocks and bonds. Keep in mind that you can’t put in additional funds but you can invest with the funds that are in the LIRA and add the income earned to the LIRA.

Yes, the income earned from a LIRA will be accumulated tax-free. You will only pay taxes when you withdraw the funds.

No, you do not need to make a new LIRA if you leave another job with a pension plan, what you could do is put the pension plan amount into the same LIRA. You must have this second pension plan from a job within the same province as the previous job which gave you the first pension plan. 

The 5 Steps of Successful Financial Planning

An overview of 5 wealth-planning steps Protect Your Wealth takes that results in a strong financial future.

1.

Gather and Analyze

At Protect Your Wealth, we will work with you to create an accurate overview of your present financial situation. Using state-of-the-art software, we will complete a thorough needs analysis to assess your present expenses and project future ones while accounting for inflation. We also perform a detailed risk assessment to help ensure that you are not taking more risk in your investments than necessary.

2.

Develop Your Blueprint for Success

After carefully considering all aspects of your finances and identifying ways to maximize tax efficiency, we will recommend an efficient retirement savings plan that tallies with your investment goals. You will receive a personalized Investment Policy Statement that summarizes our findings and recommends appropriate risk-managed investment options.

3.

Strategize and Implement Your Plan

After you approve your Investment policy statement, we will present you with a Financial Planning Priorities and Strategies document outlines your financial planning priorities and your personalized wealth-building strategies that meet both your short, and long-term financial goals. Once you review and approve your plan, it will be implemented. It is important to note that this document will change over time to ensure that it always reflects your current circumstances and complies with any changes in government policy.

4.

Forecast Your Financial Future

We use a cash flow planning analysis to create a financial forecast of your future. This analysis calculates projected outcomes, which lets you consider the consequences of financial decisions before you make them and create a stronger plan for future commitments like a child’s college fund. These forecasts are reviewed every year as your situation changes.

5.

Ongoing Monitoring and Management

Financial planning is a continuous process. To ensure that your investment needs continue to be met, we will remain in regular contact with you throughout the year and hold a yearly review to assess progress, make adjustments for changed circumstances, and evaluate promising new strategies. These meetings may be held in our office, by phone, or via Zoom.

Are you still wondering if a Locked-In Retirement Account (LIRA) is right for you?

A LIRA can be an essential piece of your financial plan. Connect with one of our advisors to determine if it’s the right type of investment for you.

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