Pros and cons of locked-in retirement accounts<\/h3>\n\n\n\nPros<\/h4>- Since LIRA funds are locked away, you can\u2019t withdraw them before retirement age \u2014 which prevents you from spending them.<\/li>
- LIRA investments can be self-managed rather than having to rely on your former place of work to do it.<\/li>
- LIRAs eliminate the risk of losing your pension money if your employer goes out of business.<\/li>
- Any earnings are tax-deferred.<\/li><\/ul>
Cons<\/h4>- Some financial institutions charge high management fees for LIRA accounts.<\/li>
- Regulations vary from province to province, making it tricky to know the rules surrounding your LIRA.<\/li>
- Pre-retirement withdrawals are allowed only under limited circumstances.<\/li><\/ul><\/div>\n<\/div>\n\n\n\n
LIRA eligibility requirements<\/h2>\n\n\n\n
Only individuals under the age of 71 can open a LIRA. That being said, not everyone under that age needs to think about opening one. <\/p>\n\n\n\n
A LIRA is an option if you leave a job with an employer-sponsored pension. You can typically choose to remain in the pension plan<\/a> and wait until retirement to receive your pension income, or you can take the commuted value of the pension and transfer it into a LIRA. Your options may vary based on the rules of your pension plan and the pension legislation in your province or territory.<\/p>\n\n\n\nYou can open a LIRA at any financial institution you like. You can also choose to manage it yourself, or have a robo-advisor or financial advisor do the work for you.<\/p>\n\n\n\n
\ud83e\udd13 Nerdy Tip:<\/strong> LIRAs are not just for former pension plan members but can also be for their former or surviving spouses or common-law partners.\u00a0<\/p>\n\n\n\nHow to withdraw from a LIRA<\/h2>\n\n\n\n
Since LIRA plans are governed by provincial pension legislation, the rules on how to unlock and withdraw from a LIRA will differ from province to province. The territories do not have their own pension legislation, so federal legislation applies to pensions earned there (and calls this type of account a \u201clocked-in RRSP.\u201d Note that the applicable legislation is based on the province or territory where you lived and earned the pension, even if you move afterwards.<\/p>\n\n\n\n
Most provinces will allow you to unlock up to 50% of your LIRA at the age of 55, though the rules and amounts vary widely. Generally speaking, LIRAs do not allow for withdrawals. Your savings and investments are held until retirement, at which point you will transfer them into an LIF or purchase a life annuity.<\/p>\n\n\n\n
While LIRAs are meant for retirement, there are a few special circumstances in which you may be able to withdraw a lump sum of cash from your LIRA at an earlier stage. Depending on the legislation governing your pension, these circumstances might include: <\/p>\n\n\n\n
\n- Unemployment, low income or financial hardship<\/li>\n\n\n\n
- Shortened life expectancy\u00a0<\/li>\n\n\n\n
- Permanent departure from Canada\u00a0<\/li>\n\n\n\n
- Medical or disability expenses<\/li>\n\n\n\n
- Having a LIRA balance below a certain amount<\/li>\n<\/ul>\n\n\n\n
\u00bb MORE:<\/strong> How do registered disability savings plans work?<\/a><\/p>\n\n\n\nLIRA rules and tax implications<\/h3>\n\n\n\n
Like an RRSP, a LIRA is tax-sheltered. This means that as long as the money stays within the LIRA, you will not be taxed on any growth. Any withdrawals are taxed as income, however. In most cases, your LIRA will remain untouched until it comes time to transfer it to an LIF or a life annuity upon retirement. <\/p>\n\n\n\n
Unlike with RRSP contributions<\/a>, money transferred into a LIRA is not tax-deductible. You already benefited from a tax deduction when you contributed to your pension plan.<\/p>\n\n\n\nSince the rules and regulations of LIRAs vary by province, it may be necessary to speak to a financial advisor or knowledgeable representative from your financial institution to understand LIRA rules where you live.<\/p>\n\n\n\n
LIRA alternatives<\/h2>\n\n\n\n
You might see a locked-in registered retirement savings plan, or locked-in RRSP, described as an alternative to a LIRA. But that\u2019s not really the case, as you don\u2019t get to choose between the two. Instead, these accounts are essentially the same, but LIRAs are available in provinces with their own pension legislation, while locked-in RRSPs are available in those governed by federal pension legislation. Federal legislation also applies to pensions earned in federally regulated businesses, like banking and transportation, no matter where you live.<\/p>\n\n\n\n
<\/h2><\/div>\nFrequently asked questions about LIRAs<\/h3><\/div>\nWhat happens to a LIRA when you die?<\/div><\/div>\nYou can name a beneficiary<\/a> to your LIRA, who will receive the funds should you pass away. If the beneficiary is your spouse or common-law partner, they may be able to make a tax-free transfer into their own RRSP or registered retirement income fund<\/a> (RRIF), depending on the provincial or federal rules. If you name someone other than your spouse (or a financially dependent child), the plan becomes part of your estate and is subject to taxes. It\u2019s a good idea to speak with a financial advisor to ensure you understand the rules governing your LIRA so you can name an appropriate beneficiary.<\/p>\n<\/div><\/div><\/div>\n\n\n\nCan you contribute to a LIRA?<\/div><\/div>\nNo, you can\u2019t. A LIRA is only for preserving locked-in pension amounts.<\/p>\n<\/div><\/div><\/div>\n\n\n\n
Can I withdraw from my LIRA early?<\/div><\/div>\nEarly LIRA withdrawals are only allowed in very specific situations, such as shortened life expectancy or financial hardship. Your LIRA is meant for retirement and the rules and regulations surrounding this account make it very difficult to withdraw early.<\/p>\n<\/div><\/div><\/div>\n<\/div><\/div><\/div>\n<\/div><\/div><\/div>\n\n\n\n
\n\t\n\t\t\n\t\t\tAbout the Author\t\t<\/h4>\n\n\t\t\t\t\t\n\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\tHannah Logan is a freelance writer and blogger who specializes in personal finance and travel. You can follow her personal travel blog EatSleepBreatheTravel.com or find her on Instagram @hannahlogan21.<\/p>\n\t\t\t\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\t\tRead more about Hannah Logan and explore their articles<\/span>\n\t\t\t\t\t\t<\/a>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t<\/div>\n<\/div>\n\n\n\n\t\n\t\t\t\t\t\n\t\t\t\tDIVE EVEN DEEPER\t\t\t<\/h4>\n\t\t\n\t\t\n\t\t\t\n\n\t\n\t\t\t\n\t\t![\"Best](\"https:\/\/www.nerdwallet.com\/ca\/wp-content\/uploads\/sites\/2\/2022\/02\/GettyImages-1277773881-e1645655618229-460x191.jpg\")
\t<\/a>\n\t\t\t\n\t\t\t\n\n\t\n\t\tBest RRSP Accounts and Rates in Canada for 2025\t<\/a>\n<\/h4>\n\n\t\n\t\tUse these high-interest RRSPs to make contributions in the short term before deciding how to invest your retirement funds in the long term. <\/p>\n\t<\/div>\n\n\t
\n\t\t\t<\/div>\n\t\t<\/div>\n\t<\/div>\n<\/div>\n<\/div>\n\n\t\n\t\t\t\n\t\t![\"Here’s](\"https:\/\/www.nerdwallet.com\/ca\/wp-content\/uploads\/sites\/2\/2021\/12\/GettyImages-969583658-e1639423091384-460x192.jpg\")
\t<\/a>\n\t\t\t\n\t\t\t\n\n\t\n\t\tHere’s How Much Money You Need To Retire\t<\/a>\n<\/h4>\n\n\t\n\t\tCommon guidance is to save enough money to have 70% of your income available each year for 25 years of retirement.<\/p>\n\t<\/div>\n\n\t
\n\t\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\t![\"\"](\"https:\/\/www.nerdwallet.com\/ca\/wp-content\/uploads\/sites\/2\/2021\/07\/Hannah-Logan-e1626212867388-40x40.jpg\")
Hannah Logan<\/a>\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t<\/div>\n\t\t<\/div>\n\t<\/div>\n<\/div>\n<\/div>\n\n\t\n\t\t\t\n\t\t![\"How](\"https:\/\/www.nerdwallet.com\/ca\/wp-content\/uploads\/sites\/2\/2022\/02\/invest-in-tfsa-e1644253718877-460x191.jpg\")
\t<\/a>\n\t\t\t\n\t\t\t\n\n\t\n\t\tHow to Invest in a TFSA\t<\/a>\n<\/h4>\n\n\t\n\t\tStore your interest-bearing or capital gains and dividend investments in a TFSA to increase your wealth without paying taxes on it.<\/p>\n\t<\/div>\n\n\t
\n\t\t\t\t\n\t\t\t\n\t\t\t
Pros<\/h4>- Since LIRA funds are locked away, you can\u2019t withdraw them before retirement age \u2014 which prevents you from spending them.<\/li>
- LIRA investments can be self-managed rather than having to rely on your former place of work to do it.<\/li>
- LIRAs eliminate the risk of losing your pension money if your employer goes out of business.<\/li>
- Any earnings are tax-deferred.<\/li><\/ul>
Cons<\/h4>- Some financial institutions charge high management fees for LIRA accounts.<\/li>
- Regulations vary from province to province, making it tricky to know the rules surrounding your LIRA.<\/li>
- Pre-retirement withdrawals are allowed only under limited circumstances.<\/li><\/ul><\/div>\n<\/div>\n\n\n\n
LIRA eligibility requirements<\/h2>\n\n\n\n
Only individuals under the age of 71 can open a LIRA. That being said, not everyone under that age needs to think about opening one. <\/p>\n\n\n\n
A LIRA is an option if you leave a job with an employer-sponsored pension. You can typically choose to remain in the pension plan<\/a> and wait until retirement to receive your pension income, or you can take the commuted value of the pension and transfer it into a LIRA. Your options may vary based on the rules of your pension plan and the pension legislation in your province or territory.<\/p>\n\n\n\nYou can open a LIRA at any financial institution you like. You can also choose to manage it yourself, or have a robo-advisor or financial advisor do the work for you.<\/p>\n\n\n\n
\ud83e\udd13 Nerdy Tip:<\/strong> LIRAs are not just for former pension plan members but can also be for their former or surviving spouses or common-law partners.\u00a0<\/p>\n\n\n\nHow to withdraw from a LIRA<\/h2>\n\n\n\n
Since LIRA plans are governed by provincial pension legislation, the rules on how to unlock and withdraw from a LIRA will differ from province to province. The territories do not have their own pension legislation, so federal legislation applies to pensions earned there (and calls this type of account a \u201clocked-in RRSP.\u201d Note that the applicable legislation is based on the province or territory where you lived and earned the pension, even if you move afterwards.<\/p>\n\n\n\n
Most provinces will allow you to unlock up to 50% of your LIRA at the age of 55, though the rules and amounts vary widely. Generally speaking, LIRAs do not allow for withdrawals. Your savings and investments are held until retirement, at which point you will transfer them into an LIF or purchase a life annuity.<\/p>\n\n\n\n
While LIRAs are meant for retirement, there are a few special circumstances in which you may be able to withdraw a lump sum of cash from your LIRA at an earlier stage. Depending on the legislation governing your pension, these circumstances might include: <\/p>\n\n\n\n
\n- Unemployment, low income or financial hardship<\/li>\n\n\n\n
- Shortened life expectancy\u00a0<\/li>\n\n\n\n
- Permanent departure from Canada\u00a0<\/li>\n\n\n\n
- Medical or disability expenses<\/li>\n\n\n\n
- Having a LIRA balance below a certain amount<\/li>\n<\/ul>\n\n\n\n
\u00bb MORE:<\/strong> How do registered disability savings plans work?<\/a><\/p>\n\n\n\nLIRA rules and tax implications<\/h3>\n\n\n\n
Like an RRSP, a LIRA is tax-sheltered. This means that as long as the money stays within the LIRA, you will not be taxed on any growth. Any withdrawals are taxed as income, however. In most cases, your LIRA will remain untouched until it comes time to transfer it to an LIF or a life annuity upon retirement. <\/p>\n\n\n\n
Unlike with RRSP contributions<\/a>, money transferred into a LIRA is not tax-deductible. You already benefited from a tax deduction when you contributed to your pension plan.<\/p>\n\n\n\nSince the rules and regulations of LIRAs vary by province, it may be necessary to speak to a financial advisor or knowledgeable representative from your financial institution to understand LIRA rules where you live.<\/p>\n\n\n\n
LIRA alternatives<\/h2>\n\n\n\n
You might see a locked-in registered retirement savings plan, or locked-in RRSP, described as an alternative to a LIRA. But that\u2019s not really the case, as you don\u2019t get to choose between the two. Instead, these accounts are essentially the same, but LIRAs are available in provinces with their own pension legislation, while locked-in RRSPs are available in those governed by federal pension legislation. Federal legislation also applies to pensions earned in federally regulated businesses, like banking and transportation, no matter where you live.<\/p>\n\n\n\n
<\/h2><\/div>\nFrequently asked questions about LIRAs<\/h3><\/div>\nWhat happens to a LIRA when you die?<\/div><\/div>\nYou can name a beneficiary<\/a> to your LIRA, who will receive the funds should you pass away. If the beneficiary is your spouse or common-law partner, they may be able to make a tax-free transfer into their own RRSP or registered retirement income fund<\/a> (RRIF), depending on the provincial or federal rules. If you name someone other than your spouse (or a financially dependent child), the plan becomes part of your estate and is subject to taxes. It\u2019s a good idea to speak with a financial advisor to ensure you understand the rules governing your LIRA so you can name an appropriate beneficiary.<\/p>\n<\/div><\/div><\/div>\n\n\n\nCan you contribute to a LIRA?<\/div><\/div>\nNo, you can\u2019t. A LIRA is only for preserving locked-in pension amounts.<\/p>\n<\/div><\/div><\/div>\n\n\n\n
Can I withdraw from my LIRA early?<\/div><\/div>\nEarly LIRA withdrawals are only allowed in very specific situations, such as shortened life expectancy or financial hardship. Your LIRA is meant for retirement and the rules and regulations surrounding this account make it very difficult to withdraw early.<\/p>\n<\/div><\/div><\/div>\n<\/div><\/div><\/div>\n<\/div><\/div><\/div>\n\n\n\n
\n\t\n\t\t\n\t\t\tAbout the Author\t\t<\/h4>\n\n\t\t\t\t\t\n\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\tHannah Logan is a freelance writer and blogger who specializes in personal finance and travel. You can follow her personal travel blog EatSleepBreatheTravel.com or find her on Instagram @hannahlogan21.<\/p>\n\t\t\t\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\t\tRead more about Hannah Logan and explore their articles<\/span>\n\t\t\t\t\t\t<\/a>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t<\/div>\n<\/div>\n\n\n\n\t\n\t\t\t\t\t\n\t\t\t\tDIVE EVEN DEEPER\t\t\t<\/h4>\n\t\t\n\t\t\n\t\t\t\n\n\t\n\t\t\t\n\t\t\t<\/a>\n\t\t\t\n\t\t\t\n\n\t\n\t\tBest RRSP Accounts and Rates in Canada for 2025\t<\/a>\n<\/h4>\n\n\t\n\t\tUse these high-interest RRSPs to make contributions in the short term before deciding how to invest your retirement funds in the long term. <\/p>\n\t<\/div>\n\n\t
\n\t\t\t<\/div>\n\t\t<\/div>\n\t<\/div>\n<\/div>\n<\/div>\n\n\t\n\t\t\t\n\t\t\t<\/a>\n\t\t\t\n\t\t\t\n\n\t\n\t\tHere’s How Much Money You Need To Retire\t<\/a>\n<\/h4>\n\n\t\n\t\tCommon guidance is to save enough money to have 70% of your income available each year for 25 years of retirement.<\/p>\n\t<\/div>\n\n\t
\n\t\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\tHannah Logan<\/a>\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t<\/div>\n\t\t<\/div>\n\t<\/div>\n<\/div>\n<\/div>\n\n\t\n\t\t\t\n\t\t\t<\/a>\n\t\t\t\n\t\t\t\n\n\t\n\t\tHow to Invest in a TFSA\t<\/a>\n<\/h4>\n\n\t\n\t\tStore your interest-bearing or capital gains and dividend investments in a TFSA to increase your wealth without paying taxes on it.<\/p>\n\t<\/div>\n\n\t
\n\t\t\t\t\n\t\t\t\n\t\t\t
Cons<\/h4>- Some financial institutions charge high management fees for LIRA accounts.<\/li>
- Regulations vary from province to province, making it tricky to know the rules surrounding your LIRA.<\/li>
- Pre-retirement withdrawals are allowed only under limited circumstances.<\/li><\/ul><\/div>\n<\/div>\n\n\n\n
LIRA eligibility requirements<\/h2>\n\n\n\n
Only individuals under the age of 71 can open a LIRA. That being said, not everyone under that age needs to think about opening one. <\/p>\n\n\n\n
A LIRA is an option if you leave a job with an employer-sponsored pension. You can typically choose to remain in the pension plan<\/a> and wait until retirement to receive your pension income, or you can take the commuted value of the pension and transfer it into a LIRA. Your options may vary based on the rules of your pension plan and the pension legislation in your province or territory.<\/p>\n\n\n\nYou can open a LIRA at any financial institution you like. You can also choose to manage it yourself, or have a robo-advisor or financial advisor do the work for you.<\/p>\n\n\n\n
\ud83e\udd13 Nerdy Tip:<\/strong> LIRAs are not just for former pension plan members but can also be for their former or surviving spouses or common-law partners.\u00a0<\/p>\n\n\n\nHow to withdraw from a LIRA<\/h2>\n\n\n\n
Since LIRA plans are governed by provincial pension legislation, the rules on how to unlock and withdraw from a LIRA will differ from province to province. The territories do not have their own pension legislation, so federal legislation applies to pensions earned there (and calls this type of account a \u201clocked-in RRSP.\u201d Note that the applicable legislation is based on the province or territory where you lived and earned the pension, even if you move afterwards.<\/p>\n\n\n\n
Most provinces will allow you to unlock up to 50% of your LIRA at the age of 55, though the rules and amounts vary widely. Generally speaking, LIRAs do not allow for withdrawals. Your savings and investments are held until retirement, at which point you will transfer them into an LIF or purchase a life annuity.<\/p>\n\n\n\n
While LIRAs are meant for retirement, there are a few special circumstances in which you may be able to withdraw a lump sum of cash from your LIRA at an earlier stage. Depending on the legislation governing your pension, these circumstances might include: <\/p>\n\n\n\n
\n- Unemployment, low income or financial hardship<\/li>\n\n\n\n
- Shortened life expectancy\u00a0<\/li>\n\n\n\n
- Permanent departure from Canada\u00a0<\/li>\n\n\n\n
- Medical or disability expenses<\/li>\n\n\n\n
- Having a LIRA balance below a certain amount<\/li>\n<\/ul>\n\n\n\n
\u00bb MORE:<\/strong> How do registered disability savings plans work?<\/a><\/p>\n\n\n\nLIRA rules and tax implications<\/h3>\n\n\n\n
Like an RRSP, a LIRA is tax-sheltered. This means that as long as the money stays within the LIRA, you will not be taxed on any growth. Any withdrawals are taxed as income, however. In most cases, your LIRA will remain untouched until it comes time to transfer it to an LIF or a life annuity upon retirement. <\/p>\n\n\n\n
Unlike with RRSP contributions<\/a>, money transferred into a LIRA is not tax-deductible. You already benefited from a tax deduction when you contributed to your pension plan.<\/p>\n\n\n\nSince the rules and regulations of LIRAs vary by province, it may be necessary to speak to a financial advisor or knowledgeable representative from your financial institution to understand LIRA rules where you live.<\/p>\n\n\n\n
LIRA alternatives<\/h2>\n\n\n\n
You might see a locked-in registered retirement savings plan, or locked-in RRSP, described as an alternative to a LIRA. But that\u2019s not really the case, as you don\u2019t get to choose between the two. Instead, these accounts are essentially the same, but LIRAs are available in provinces with their own pension legislation, while locked-in RRSPs are available in those governed by federal pension legislation. Federal legislation also applies to pensions earned in federally regulated businesses, like banking and transportation, no matter where you live.<\/p>\n\n\n\n
<\/h2><\/div>\nFrequently asked questions about LIRAs<\/h3><\/div>\nWhat happens to a LIRA when you die?<\/div><\/div>\nYou can name a beneficiary<\/a> to your LIRA, who will receive the funds should you pass away. If the beneficiary is your spouse or common-law partner, they may be able to make a tax-free transfer into their own RRSP or registered retirement income fund<\/a> (RRIF), depending on the provincial or federal rules. If you name someone other than your spouse (or a financially dependent child), the plan becomes part of your estate and is subject to taxes. It\u2019s a good idea to speak with a financial advisor to ensure you understand the rules governing your LIRA so you can name an appropriate beneficiary.<\/p>\n<\/div><\/div><\/div>\n\n\n\nCan you contribute to a LIRA?<\/div><\/div>\nNo, you can\u2019t. A LIRA is only for preserving locked-in pension amounts.<\/p>\n<\/div><\/div><\/div>\n\n\n\n
Can I withdraw from my LIRA early?<\/div><\/div>\nEarly LIRA withdrawals are only allowed in very specific situations, such as shortened life expectancy or financial hardship. Your LIRA is meant for retirement and the rules and regulations surrounding this account make it very difficult to withdraw early.<\/p>\n<\/div><\/div><\/div>\n<\/div><\/div><\/div>\n<\/div><\/div><\/div>\n\n\n\n
\n\t\n\t\t\n\t\t\tAbout the Author\t\t<\/h4>\n\n\t\t\t\t\t\n\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\tHannah Logan is a freelance writer and blogger who specializes in personal finance and travel. You can follow her personal travel blog EatSleepBreatheTravel.com or find her on Instagram @hannahlogan21.<\/p>\n\t\t\t\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\t\tRead more about Hannah Logan and explore their articles<\/span>\n\t\t\t\t\t\t<\/a>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t<\/div>\n<\/div>\n\n\n\n\t\n\t\t\t\t\t\n\t\t\t\tDIVE EVEN DEEPER\t\t\t<\/h4>\n\t\t\n\t\t\n\t\t\t\n\n\t\n\t\t\t\n\t\t\t<\/a>\n\t\t\t\n\t\t\t\n\n\t\n\t\tBest RRSP Accounts and Rates in Canada for 2025\t<\/a>\n<\/h4>\n\n\t\n\t\tUse these high-interest RRSPs to make contributions in the short term before deciding how to invest your retirement funds in the long term. <\/p>\n\t<\/div>\n\n\t
\n\t\t\t<\/div>\n\t\t<\/div>\n\t<\/div>\n<\/div>\n<\/div>\n\n\t\n\t\t\t\n\t\t\t<\/a>\n\t\t\t\n\t\t\t\n\n\t\n\t\tHere’s How Much Money You Need To Retire\t<\/a>\n<\/h4>\n\n\t\n\t\tCommon guidance is to save enough money to have 70% of your income available each year for 25 years of retirement.<\/p>\n\t<\/div>\n\n\t
\n\t\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\tHannah Logan<\/a>\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t<\/div>\n\t\t<\/div>\n\t<\/div>\n<\/div>\n<\/div>\n\n\t\n\t\t\t\n\t\t\t<\/a>\n\t\t\t\n\t\t\t\n\n\t\n\t\tHow to Invest in a TFSA\t<\/a>\n<\/h4>\n\n\t\n\t\tStore your interest-bearing or capital gains and dividend investments in a TFSA to increase your wealth without paying taxes on it.<\/p>\n\t<\/div>\n\n\t
\n\t\t\t\t\n\t\t\t\n\t\t\t
LIRA eligibility requirements<\/h2>\n\n\n\n
Only individuals under the age of 71 can open a LIRA. That being said, not everyone under that age needs to think about opening one. <\/p>\n\n\n\n
A LIRA is an option if you leave a job with an employer-sponsored pension. You can typically choose to remain in the pension plan<\/a> and wait until retirement to receive your pension income, or you can take the commuted value of the pension and transfer it into a LIRA. Your options may vary based on the rules of your pension plan and the pension legislation in your province or territory.<\/p>\n\n\n\n You can open a LIRA at any financial institution you like. You can also choose to manage it yourself, or have a robo-advisor or financial advisor do the work for you.<\/p>\n\n\n\n \ud83e\udd13 Nerdy Tip:<\/strong> LIRAs are not just for former pension plan members but can also be for their former or surviving spouses or common-law partners.\u00a0<\/p>\n\n\n\n Since LIRA plans are governed by provincial pension legislation, the rules on how to unlock and withdraw from a LIRA will differ from province to province. The territories do not have their own pension legislation, so federal legislation applies to pensions earned there (and calls this type of account a \u201clocked-in RRSP.\u201d Note that the applicable legislation is based on the province or territory where you lived and earned the pension, even if you move afterwards.<\/p>\n\n\n\n Most provinces will allow you to unlock up to 50% of your LIRA at the age of 55, though the rules and amounts vary widely. Generally speaking, LIRAs do not allow for withdrawals. Your savings and investments are held until retirement, at which point you will transfer them into an LIF or purchase a life annuity.<\/p>\n\n\n\n While LIRAs are meant for retirement, there are a few special circumstances in which you may be able to withdraw a lump sum of cash from your LIRA at an earlier stage. Depending on the legislation governing your pension, these circumstances might include: <\/p>\n\n\n\n \u00bb MORE:<\/strong> How do registered disability savings plans work?<\/a><\/p>\n\n\n\n Like an RRSP, a LIRA is tax-sheltered. This means that as long as the money stays within the LIRA, you will not be taxed on any growth. Any withdrawals are taxed as income, however. In most cases, your LIRA will remain untouched until it comes time to transfer it to an LIF or a life annuity upon retirement. <\/p>\n\n\n\n Unlike with RRSP contributions<\/a>, money transferred into a LIRA is not tax-deductible. You already benefited from a tax deduction when you contributed to your pension plan.<\/p>\n\n\n\n Since the rules and regulations of LIRAs vary by province, it may be necessary to speak to a financial advisor or knowledgeable representative from your financial institution to understand LIRA rules where you live.<\/p>\n\n\n\n You might see a locked-in registered retirement savings plan, or locked-in RRSP, described as an alternative to a LIRA. But that\u2019s not really the case, as you don\u2019t get to choose between the two. Instead, these accounts are essentially the same, but LIRAs are available in provinces with their own pension legislation, while locked-in RRSPs are available in those governed by federal pension legislation. Federal legislation also applies to pensions earned in federally regulated businesses, like banking and transportation, no matter where you live.<\/p>\n\n\n\n You can name a beneficiary<\/a> to your LIRA, who will receive the funds should you pass away. If the beneficiary is your spouse or common-law partner, they may be able to make a tax-free transfer into their own RRSP or registered retirement income fund<\/a> (RRIF), depending on the provincial or federal rules. If you name someone other than your spouse (or a financially dependent child), the plan becomes part of your estate and is subject to taxes. It\u2019s a good idea to speak with a financial advisor to ensure you understand the rules governing your LIRA so you can name an appropriate beneficiary.<\/p>\n<\/div><\/div><\/div>\n\n\n\n No, you can\u2019t. A LIRA is only for preserving locked-in pension amounts.<\/p>\n<\/div><\/div><\/div>\n\n\n\n Early LIRA withdrawals are only allowed in very specific situations, such as shortened life expectancy or financial hardship. Your LIRA is meant for retirement and the rules and regulations surrounding this account make it very difficult to withdraw early.<\/p>\n<\/div><\/div><\/div>\n<\/div><\/div><\/div>\n<\/div><\/div><\/div>\n\n\n\n Hannah Logan is a freelance writer and blogger who specializes in personal finance and travel. You can follow her personal travel blog EatSleepBreatheTravel.com or find her on Instagram @hannahlogan21.<\/p>\n\t\t\t\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\t\tRead more about Hannah Logan and explore their articles<\/span>\n\t\t\t\t\t\t<\/a>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t<\/div>\n<\/div>\n\n\n\n\t Use these high-interest RRSPs to make contributions in the short term before deciding how to invest your retirement funds in the long term. <\/p>\n\t<\/div>\n\n\t Common guidance is to save enough money to have 70% of your income available each year for 25 years of retirement.<\/p>\n\t<\/div>\n\n\t Store your interest-bearing or capital gains and dividend investments in a TFSA to increase your wealth without paying taxes on it.<\/p>\n\t<\/div>\n\n\tHow to withdraw from a LIRA<\/h2>\n\n\n\n
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LIRA rules and tax implications<\/h3>\n\n\n\n
LIRA alternatives<\/h2>\n\n\n\n
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Frequently asked questions about LIRAs<\/h3><\/div>
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