The locked-in retirement account (LIRA) is a type of registered , tax-deferred investment vehicle in Canada with some restrictions. The LIRA is designed to hold pension funds from a members former employer’s pension plan, an ex-spouse, or a surviving spouse. Cash withdrawals are not permitted while the funds are locked in. When you leave an employer where you had a pension plan, you can choose to turn it into a LIRA.
What are the Benefits of a LIRA?
In a LIRA, your savings will be kept “locked-in,” which means you won’t be able to withdraw money until you retire. On one hand, that means you can’t access it for expenses like education or housing; on the other, that makes it easier to be sure your money is there when you’re ready to turn it into retirement income. At retirement, 50% can be transferred to your RRSP or RRIF or taken in cash with taxes payable. You can’t contribute money, but depending on your plan, you may be able to transfer locked-in funds from another registered plan.
Can You Use a LIRA for a Down Payment on a House?
Unfortunately not. LIRA withdrawal rules state that it does not act like an RRSP, which does allow you to withdraw up to $35,000 of your savings for a down payment on a home, as part of the Home Buyers’ Plan. Nor can you use the money from a LIRA to fund your education, as you can with an RRSP and the Lifelong Learning Plan.
Can I Access My LIRA Before 55?
Generally, the only way to unlock a LIRA is to retire, and the earliest age you can do that is 55. Different jurisdictions have different rules for LIRA unlocking. There are some reasons for LIRA unlocking which are common to some provinces.
How Do I Access Your LIRA in Alberta?
In Alberta, any time after age 50, the proceeds can be transferred to a LIF, and retirement income is initiated from the LIF account. You can unlock the money in your LIRA or LIF under the “small amounts” rule if:
- the value of your LIRA or LIF is less than $13,700
- you are 65 years of age or older, and the value of your LIRA or LIF is less than $27,400
Can You Unlock 50% of My LIRA in Ontario?
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.
Can You Manage Your Own LIRA?
Manage your investments in the Canadian and US markets according to your own strategy with a self-directed LIRA. Depending on the jurisdiction of your pension plan, there are different regulations governing conversion to a locked-in account.
What Happens to a LIRA When You Turn 71?
In the same way that an RRSP turns into a Registered Retirement Income Fund (RRIF) at the end of the year you turn 71, a LIRA can be converted into a Life Income Fund (LIF).
Withdrawing from a LIRA Account
When you withdraw funds from a LIRA, your financial institution withholds the amount of taxes due to the government on your behalf. The tax rates for withdrawals depend on your residency and the amount you withdraw. For residents of Canada (excluding Quebec), the rates are as follows:
- 10% on amounts up to $5,000
- 20% on amounts over $5,000 up to and including $15,000
- 30% on amounts over $15,000
In the Event of Death
When you die, your LIRA is automatically transferred to your spouse, unlike an RRSP, where you can choose the beneficiary. Choose whether to turn your LIRA into a life annuity or another income fund when you retire.
LIRA Withdrawal Exceptions
Check the rules for your specific LIRA to confirm your options:
- Federal (includes Yukon, NWT and Inuvik)
- British Columbia
- Alberta
- Saskatchewan
- Manitoba
- Ontario
- Quebec
- Nova Scotia
- Newfoundland & Labrador
- New Brunswick
LIRAs don’t exist in Prince Edward Island.
