Understanding Your LIRA: A Guide to Securing Your Locked-In Retirement Savings
The Locked-In Retirement Account (LIRA) is a crucial tool for Canadians who have pension funds from a former employer and want to ensure those savings are preserved for retirement. Unlike RRSPs, the funds in a LIRA are locked in until retirement age, which helps safeguard your long-term financial security. Understanding how to manage and grow your LIRA effectively is key to maximizing your retirement income.
Key Benefits and Uses of Your LIRA
Preserved Retirement Savings
Funds transferred into your LIRA are locked in until retirement, ensuring that your pension savings are preserved and protected for your future needs.
Tax-Deferred Growth
Investment income within your LIRA, including capital gains and dividends, grows tax-deferred until withdrawal, allowing your savings to compound over time.
Secure Your Retirement Income
A LIRA is designed to convert into a steady income stream during retirement, providing financial security when you stop working.
Wide Range of Investments
LIRAs can hold a variety of investment types, such as stocks, bonds, mutual funds, and GICs, enabling you to tailor your portfolio to your retirement goals.
Mandatory Conversion at Retirement
At retirement, your LIRA must be converted to a life income fund (LIF) or an annuity, ensuring a regulated and steady income throughout your retirement years.