Locked In Retirement Account (LIRA)
A LIRA, or Locked-In Retirement Account, is a type of investment vehicle available in Canada. It is designed to hold and grow retirement savings that originated from a registered pension plan or a locked-in RRSP (Registered Retirement Savings Plan).
The primary purpose of a LIRA is to preserve and protect retirement funds until the account holder reaches retirement age. The funds held within a LIRA cannot be withdrawn in cash form, except in specific circumstances, such as financial hardship or a shortened life expectancy.
Typically, individuals accumulate funds in a LIRA while they are employed and contributing to a pension plan. When they leave their employer or the pension plan, the funds accumulated in their pension plan or locked-in RRSP are transferred to a LIRA. The account holder gains control over the investments within the LIRA and can choose from a range of investment options such as mutual funds, stocks, bonds, and other eligible assets.
Once the account holder reaches the age of 55, they can convert the LIRA into a Life Income Fund (LIF) or a Locked-In Retirement Income Fund (LRIF), depending on the regulations in their province of residence. These funds provide a steady income stream during retirement while still maintaining certain restrictions on withdrawals to ensure the funds last throughout retirement.
It's important to note that the specific rules and regulations governing LIRAs can vary by province, and there may be restrictions on the amount of funds that can be transferred to a LIRA, as well as the timing and conditions for converting a LIRA into an income stream. Therefore, it's advisable to consult with a financial advisor or pension specialist to understand the details and implications of a LIRA in your specific situation.
The primary purpose of a LIRA is to preserve and protect retirement funds until the account holder reaches retirement age. The funds held within a LIRA cannot be withdrawn in cash form, except in specific circumstances, such as financial hardship or a shortened life expectancy.
Typically, individuals accumulate funds in a LIRA while they are employed and contributing to a pension plan. When they leave their employer or the pension plan, the funds accumulated in their pension plan or locked-in RRSP are transferred to a LIRA. The account holder gains control over the investments within the LIRA and can choose from a range of investment options such as mutual funds, stocks, bonds, and other eligible assets.
Once the account holder reaches the age of 55, they can convert the LIRA into a Life Income Fund (LIF) or a Locked-In Retirement Income Fund (LRIF), depending on the regulations in their province of residence. These funds provide a steady income stream during retirement while still maintaining certain restrictions on withdrawals to ensure the funds last throughout retirement.
It's important to note that the specific rules and regulations governing LIRAs can vary by province, and there may be restrictions on the amount of funds that can be transferred to a LIRA, as well as the timing and conditions for converting a LIRA into an income stream. Therefore, it's advisable to consult with a financial advisor or pension specialist to understand the details and implications of a LIRA in your specific situation.
