Lesson Locked-in accounts

LIRA Locked-in Retirement Account

Learn more about LIRA accounts (Locked-in Retirement Accounts).

A LIRA, Locked-In Retirement Account, is designed to help Canadians accumulate pension money outside of a pension plan.

When you leave a company where you have a pension, whether you left or you have been laid off—you have to transfer your pension money to a LIRA (In some provinces it’s referred to as Locked-In RRSP or LRSP).

LIRAs are somewhat similar to RRSPs since both accounts are tax-sheltered and allow you to invest in a wide variety of investments. Having said that, there are some key differences, for example:

  • No contributions are allowed in LIRA accounts, but your portfolio can still grow from your investments
  • You cannot withdraw funds until a certain age or until you meet a certain criteria

The purpose of this account is to provide you with income during your retirement years. If you left your employer before retirement, the purpose remains the same and the funds are locked for your retirement years.

In some circumstances, you’ll be allowed to withdraw funds before the prescribed retirement age, for reasons such as financial hardships, disability, medical costs, shortened life expectancy, etc.

The prescribed retirement age and special withdrawal circumstances vary based on the province your account is registered with. You can read more about withdrawing from a LIRA here.

You can diversify and build a portfolio by investing in one or more of the RSP-eligible products below:

  • Stocks (both Canadian and foreign stocks)
  • ETFs
  • Mutual funds
  • Bonds (including government, corporate, strip, and savings bonds)
  • Gold and silver bars
  • GICs
  • Treasury bills (T-bills)
  • Cash
  • And more

LIRA accounts are also available as Questwealth Portfolios.

Here are some important things you should know about LIRAs:

  • At retirement, account holders must convert their LIRAs/LRSPs into Life Income Funds (LIF) or Locked-In Retirement Income Funds (LRIF). Once the accounts are converted, they will be used to provide pension income during the account holder’s retirement years.
  • LIRAs/LRSPs can be registered either federally or provincially. LIRAs are registered provincially, while LRSP are registered federally. Having said that, the two accounts share the same purpose. Today, the majority of locked-in accounts are registered provincially.

You can learn more about converting a LIRA to a LIF (or LRIF) in this article here.

Note: The information in this blog is for educational purposes only and should not be used or construed as financial or investment advice by any individual. Information obtained from third parties is believed to be reliable, but no representations or warranty, expressed or implied, is made by Questrade, Inc., its affiliates or any other person to its accuracy.

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