Unlocking Opportunity from a Locked-in Retirement Account (LIRA)

A Locked-in Retirement Account allows transfer of funds from defined benefit and defined contribution pension plans to a self administered savings plan with similar rules.

They were formerly known as locked-in RRSPs. However, confusion over the difference between a regular RRSP and a locked-in RRSP led the financial industry to adopt the term LIRA for new registered plans of this nature.

Some of the older plans may still be referred to as locked-in RRSPs, but they are essentially one and the same.

A Life Income Fund (LIF) requires conversion of funds in a LIRA to an income stream at a certain age governed by certain rules.

Since January 1st 2008, those who are age 50 and have a LIRA that is under the Alberta jurisdiction, can unlock 50% of this account.

At age of 50 and over, you can transfer it to a LIF or purchase an annuity. At the time of transfer, you have a one time opportunity of taking 50% of the value of the LIRA account as income.

You will pay taxes on that income in the year that you remove it. Or, you can transfer that 50% to your RRSP or RRIF. Doing so will give you more flexibility than leaving that amount locked-in.

At age 71, you have no choice but to convert to a LIF or purchase an annuity. You can unlock 50% then.

This 50% rule was established January 1st 2008. If you had a LIF prior to 2008, you cannot unlock 50%.

When converting a LIF or purchasing annuities, pension partners (spouses or common-law spouses) will have to sign a waiver giving up their entitlement to a survivor pension.

Different provinces have different rules. Be sure to consult with your adviser to clarify these details.

Click below for more information:-

Locked-in Retirement Account information and accessing pension funds



Link to list of articles


Back to Home Page

Retirement Planning Facebook Page....

Feel Great Retirement E-zine is issued quarterly and includes links to new articles on retirement planning at this website and other links of interest. If you wish to receive it, please fill out the form below and submit it.

Enter Your E-mail Address
Enter Your First Name (optional)
Then

Don't worry — your e-mail address is totally secure.
I promise to use it only to send you Feel Great Retirement E-zine.