A Locked-in Retirement Account (LIRA) is an important form of financial security for Canadians. It is a tax-sheltered pension savings account that can be funded with money transferred from an employer-sponsored pension plan. The funds held in the account are protected and cannot be withdrawn until the account holder’s retirement.
The primary benefit of the LIRA is the tax-sheltering of funds. Tax-deferred savings provide a great opportunity for Canadians to save for retirement in a way that allows for more funds as the years progress. All of the money that is saved in a LIRA is automatically invested in an interest-bearing account, where the funds can accumulate over time. One of the most notable benefits of a LIRA is that funds in the account can accumulate without the account holder having to pay taxes on the interest they are earning until they retire.
When a Canadian retires, they may choose to stay with their LIRA or convert the account into another retirement funds or life annuity products. Transferring a LIRA to another retirement fund requires following provincial pension laws. Similarly, converting a LIRA to a life annuity requires following federal pension laws governing unlocked Registered Retirement Savings Plans (RRSP).
In addition to the tax-sheltering advantage, a LIRA also provides greater control and flexibility to the account holder. Unlike a pension plan, a LIRA can be managed by the account holder or another party according to the account holder’s preferences. Account holders can determine their desired retirement age, the type of investments that the funds will be placed in, and the amount of funds that will be contributed to the account.
When it comes to retirement savings and security, Locked-In Retirement Accounts are an invaluable tool, and the LIRA is an excellent choice for those who want to ensure that their hard-earned money continues to grow without any interruption. While LIRA accounts require following applicable laws, they are an important step in a Canadian’s financial security and provide Canadians with the peace of mind of knowing that their retirement funds are secure and tax-sheltered.
The primary benefit of the LIRA is the tax-sheltering of funds. Tax-deferred savings provide a great opportunity for Canadians to save for retirement in a way that allows for more funds as the years progress. All of the money that is saved in a LIRA is automatically invested in an interest-bearing account, where the funds can accumulate over time. One of the most notable benefits of a LIRA is that funds in the account can accumulate without the account holder having to pay taxes on the interest they are earning until they retire.
When a Canadian retires, they may choose to stay with their LIRA or convert the account into another retirement funds or life annuity products. Transferring a LIRA to another retirement fund requires following provincial pension laws. Similarly, converting a LIRA to a life annuity requires following federal pension laws governing unlocked Registered Retirement Savings Plans (RRSP).
In addition to the tax-sheltering advantage, a LIRA also provides greater control and flexibility to the account holder. Unlike a pension plan, a LIRA can be managed by the account holder or another party according to the account holder’s preferences. Account holders can determine their desired retirement age, the type of investments that the funds will be placed in, and the amount of funds that will be contributed to the account.
When it comes to retirement savings and security, Locked-In Retirement Accounts are an invaluable tool, and the LIRA is an excellent choice for those who want to ensure that their hard-earned money continues to grow without any interruption. While LIRA accounts require following applicable laws, they are an important step in a Canadian’s financial security and provide Canadians with the peace of mind of knowing that their retirement funds are secure and tax-sheltered.