LIRAs — the RRSP’s less flexible cousin

Locked-in Retirement Accounts (LIRAs) differ from RRSPs in that you usually can’t “unlock” the funds in them before age 55.

I guess the annual RRSP season is just around the corner, based on some of my most recent writing assignments. Earlier in the week, for, I made the case for semi-retirees in their Sixties (like me!) for starting the process of withdrawing money from RRSPs early. Click on the headline Retirement Tax Tips. The Hub summary ran here under the headline The case for Early RRSP withdrawals.

Then at the end of the week, the Financial Post ran my column titled The RRSP’s less flexible cousin: Everything you need to know about the LIRA, which is also available in the Saturday print edition.

As TriDelta Financial wealth advisor Matthew Ardrey told me for the FP article, you’re going to see a lot more about LIRAs in the coming years. Whether you’re leaving a classic Defined Benefit pension plan or a more market-tied Defined Contribution pension plan, the job market these days is in such flux that a lot of people are going to have to start learning about what happens when you leave an employer pension plan earlier than you might once have envisaged.

LIRAs will multiply as Boomers reach Findependence

In the case of a DB pension, you’ll be getting a lump sum based on the so-called “Commuted Value” of the pension at the time you leave (whether voluntarily or due to corporate layoffs or restructuring). I suggest that those who value the certainty of future DB pension payments plan eventually to annuitize such plans, likely the end of the year you turn 71.

As for DC plans that turn into LIRAs, these are no great mystery. My wife has a modest-sized LIRA after she left a pension plan in her industry some ten years ago. To us, it behaves and looks exactly the same as an RRSP, and holds similar securities. Yes, it was “locked in” but we’re still letting the plan grow via the underlying investments (unlike RRSPs, you can’t add to it.) At some point, and as the FP article goes into, it will be time to start accessing the funds but that’s still a few years away yet.

The Hub turns 2

Also this week, as explained in the previous blog, the Hub — aka Financial Independence Hub — turned two years old. Further to my comments there, it may be an opportune time to point out that while Hub blogs may link to pieces I’ve written in the FP, MoneySense, Motley Fool and a few other media outlets, that the Hub versions are fresh blogs. They may cover similar territory but tend to have more links, as was the case in the RRSP withdrawal piece linked above.

As for the new book, Victory Lap Retirement, there continues to be a fair bit of activity around it. There will be segments this weekend from Calgary’s NewsTalk 770 (More Than Money program, available in Calgary after 4:06 pm Saturday) and with Mike Eppel at  Toronto’s 680 News. We’ll add links as they become available. From reader sightings, the new book is definitely now in bookstores, just in time for Christmas!

Leave a Reply