Last updated: August 31, 2022

What is a LIRA?

A locked-in retirement account (LIRA) is a Canadian registered account designed to hold and invest pension assets that you and your former employers contributed to . Investment income within the LIRA is tax-deferred – this means you won’t have to pay income tax until you withdraw funds. 

Assets within a LIRA are “locked in,” which means you generally can’t make any withdrawals until you reach a specific age. The “locked in” rules of a LIRA are meant to restrict your access to your pension assets. These restrictions are similar to the ones that would’ve applied had you left the assets in your former employer’s pension plan. The specific “locked in” rules are determined by applicable federal, provincial, and territorial pension legislation. 

Leaving your employer with a pension plan

Let’s say you have a pension plan with your employer. When you leave your job , you’d have to decide what to do with this pension. Depending on your specific situation and terms of the plan, you may have three options:

  • leave your pension assets where they are, 
  • purchase a payout annuity, or 
  • transfer your pension assets into a locked-in account like a LIRA.

Benefits of a LIRA

Saving for retirement

The funds within a LIRA are locked-in  until you’ve reached the minimum age prescribed by pension law. This means you can’t dip into your savings early. This allows you to keep more of your money for your retirement years.

Customize your portfolio

With a LIRA, you can diversify and build a portfolio by investing in stocks, mutual fundsGICs, etc. A diversified portfolio can help reduce risk and may lead to a higher return.

LIRA withdrawal rules

Taking money out of your LIRA

In some provinces, you may “unlock” up to 50% of your LIRA at age 55 . At this point, depending on your jurisdiction, you have a few options such as transferring your funds directly into another registered account or buying a life annuity. Remember, funds in registered accounts and life annuities are tax-sheltered. This means you won’t be taxed until you make withdrawals or receive payments.

Special exceptions for early LIRA withdrawals

There are special exceptions  that allow withdrawals at any age.  These exceptions may apply to you if you find yourself in one of these circumstances: 

you’re facing financial hardships (such as being unable to make rent or mortgage payments or having a high amount of medical expenses), 

  • you’re no longer a resident of Canada,  
  • you have a reduced life expectancy, or 
  • you have a small amount of assets in your LIRA.  

Please note you may need your spouse or common-law partner’s consent in order to make early LIRA withdrawals related to a special exception.

Additional information

Keep in mind that LIRA rules relating to withdrawals depend on applicable pension legislation. Check the applicable government’s website to learn more about pension savings and locked-in accounts. Or, connect with an advisor for more detailed information.

Interested in learning more about a LIRA?
A Sun Life advisor can help you figure it out and build a plan that fits your financial needs and goals.

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Frequently Asked Questions

A Sun Life advisor can answer your questions and help you set up a plan that fits your financial needs and goals.

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