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Lock In Retirement Acoount (LIRA) – lifetimefinancials

Lock In Retirement Acoount (LIRA)

Lock In Retirement Acoount

A Locked-In Retirement Account (LIRA), and the virtually identical Locked-in Retirement Savings Plan (LRSP), are Canadian investment accounts designed specifically to hold locked-in pension funds for former plan members, former spouses or common-law partners, or surviving spouses or partners.

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 may be chosen at any age to hold funds transferred from a pension plan upon the termination of membership in a pension plan; the disintegration of a marriage or common-law partnership; or death before retirement. Unlike RRSPs, which can be cashed in whenever the owner decides, a locked-in retirement account does not provide such an option.

Difference between LIRAs and LRSPs.

LIRA refers to a provincial Locked-in Retirement Account, while LRSP refers to a federal Locked-in Retirement Savings Plan (RSP). The two accounts serve identical purposes.

Benefits

  • Any growth will continue to be tax free until you withdraw the money
  • Control your investments—you decide how you invest your money
  • Convert your LIRA to a Life Income Fund (LIF) or life annuity for your retirement income as allowed by the pension rules that govern your locked-in money.
  • Name a beneficiary to receive your money after your death if you have a spouse, they may have priority as a beneficiary.

Tax Free Saving Account

The Tax-Free Savings Account (TFSA) program began in 2009. It is a way for individuals who are 18 and older to set money aside tax-free throughout their lifetime. Contributions to a TFSA are not deductible for income tax purposes. Any amount contributed as well as any income earned in the account is generally tax-free, even when it is withdrawn. Administrative or other fees in relation to TFSA and any interest or money borrowed to contribute to a TFSA are not deductible. For 2018, total contribution room since 2009 is $57,500

Benefits

TFSA is a highly recommended because of several benefits:

  • Flexible withdrawals
  • Tax-free investment
  • No income required
  • No limit to lifetime contribution
  • No credit or impact on Federal Benefits
  • Eligible for life
  • Indefinite carry-forwards
  • Perfect choice for quick investment growth