Locked-In Retirement Account (LIRA)

What does the locked-in retirement account mean?

A locked-in retirement account (LIRA) is a type of registered retirement savings plan in Canada that blocks pension funds in investments. Although the funds are frozen, they are not available for withdrawal. Pension funds that are transferred to a LIRA are used to purchase a life annuity, transferred to a life income fund (LIF) or a locked-in retirement income fund (LRIF). At retirement age, the life annuity, LIF and / or LRIF, provides for a life annuity.

Understanding a locked-in retirement account (LIRA)

The locked-in retirement account is designed to hold pension funds for a former plan member, former spouse or common-law partner, or a surviving spouse or partner. The LIRA can be elected at any age to hold funds transferred from a pension plan at the end of membership in a pension plan; the breakdown of a marriage or common-law relationship; or death before retirement. Unlike RRSPs, which can be cashed whenever the owner decides, a locked-in retirement account does not offer such an option.

How IRCs work

According to the Quebec government website, “Unlike an RRSP, LIRA funds are locked-in and can only be used to provide retirement income. Thus, the amounts cannot be withdrawn, except in certain circumstances where a refund of your Like an RRSP, you can hold a LIRA until December 31 of the year in which you reach the age of 71 years. Before this date, you can transfer your LIRA to another LIRA, for example, if you change your financial institution. can also transfer your life income fund (LIF) to a LIRA, especially when you want to defer payment of retirement income. Consult the list of financial institutions offering LIRAs or LIFs for the transfer instruments available. “

These plans are governed by federal or provincial pension legislation. Depending on the province, there are different rules on how to unlock locked-in pension funds. Each locked-in pension must comply with the laws of a specific province or with federal laws. Various reasons for unlocking include low income, potential foreclosure, eviction for late rent, first month’s rent and security deposit, high medical or disability costs, no longer residing in Canada and shortened life expectancy.

Unlocking 50% of a LIRA can be done only once if you are 55 or older in certain provinces and at the federal level. Unlocking a small balance is allowed if the balance is a certain amount.

It is best to consult a financial advisor if the amounts involved are significant.

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