What is the strategy for my LIRA?
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Thread: What is the strategy for my LIRA?

  1. #1
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    What is the strategy for my LIRA?

    Due to a company lay off, I have a locked-in retirement account (LIRA) that I have elected to self direct. Right now it is in cash ($11,000.00 in the LIRA and I am 50 years old), but if I have my facts correct, I can't touch this money until retirement when it can be transferred to a RIF. Where can I safely place this money to achieve a moderate return. I am not a gunslinger, so I just want a nice retuun over time. It appears there are no tax consequences with a LIRA to worry about right now so this may influence things. Any thoughts?


  2. #2
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    Kewlthing - my 2 cents
    Today I have a DCPP with my company worth about $7.3K. I figure I'll be 'right-sized' sometime this year and plan to transfer this out to a LIRA with my discount broker.

    Due to how I would withdraw the amounts, I view each account (RRSP, ATSV-trading, RESP, LIRA) as a stand-alone entity and thus the $7.3K isn't enough for diversification via individual stocks. Thus, my personal plans are to buy a Canadian market -index ETF (say XIC from iShare or CRQ from Claymore) and ignore it until I can use it.

    There could be an argument for Cdn/International/US ETCs for this $7K but I don't think this amount warrants the slice & dice with the up front trading fees - minimal as they are.

  3. #3
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    kewlthing - The provinces have different rules for locked-in accounts.

    From an investment point of view, if you are going to save this money for your retirement then just treat it like an RRSP (minus the withdrawals). What do you invest your rrsp in?

    Some of the provinces have provisions for removing part or all of locked-in accounts. In Ontario for example, there have been several "unlock" provisions where you can unlock 25% of the account value - these seem to happen every year.

    Also in Ontario if your total account balance (of all your locked-in accounts) is below ~ $18,800 (approx) and you are 55 years of age then you can just unlock the entire account. This sounds like your situation in 5 years.

    Unlocking doesn't have to mean withdrawing in cash (which creates taxable income) - you can also just transfer the money to an rrsp account with no tax consequences.
    Mike Holman
    Money Smarts Blog Investing and Personal Finance

  4. #4
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    Look into the rules for LIRAs in your province. When it matures you can't actually transfer it inot a RRIF, whihc has only minimum withdrawal rates. It has to be transferred to a LIF, whihc has maximum annual withdrawal rates.

    However each province has different rules for closing small LIRAs early, or transferring them, or consolidating them.

    If you decide to keep the fund invested, you need to decide how soon you expect to make withdrawals befoe you can decide what to invest in. For that small amount a simple CDN balanced fudn is easiest, or one of ING's Streetwise Porfolios to minimize MER's. But if you intend (and are allowed) to withdraw money in only 5 years you may need something more conservative.

  5. #5
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    CAn new money be deposited in a LIRA?

  6. #6
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    Quote Originally Posted by rinoscar View Post
    CAn new money be deposited in a LIRA?
    No, you can't make "contributions" to a LIRA, like you can for an RRSP.

    You can however, transfer in money from other LIRAs or DB plans if they are in the same province. I'm not 100% of the exact rules for this situation.
    Mike Holman
    Money Smarts Blog Investing and Personal Finance

  7. #7
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    Thanks Pillar,

    I was 99.9% sure that was the case, but still neede to make sure about the
    .01%

  8. #8
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    Cool

    This year, the Ontario government rules allowed me to convert my LIRA to a New Life Income Fund at which time I was able to take 50 percent out without penalty. I opted to move this 50 percent to my RRSP account.

    I feel that all Ontario residents should take advantage of this rather than leave everything locked up in their old LIRA if they haven't already done so.

    You don't need to sell any of your holdings as all of the transfers can be done "in kind".

  9. #9
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    Quote Originally Posted by kewlthing View Post
    Due to a company lay off, I have a locked-in retirement account (LIRA) that I have elected to self direct. Right now it is in cash ($11,000.00 in the LIRA and I am 50 years old), but if I have my facts correct, I can't touch this money until retirement when it can be transferred to a RIF. Where can I safely place this money to achieve a moderate return. I am not a gunslinger, so I just want a nice retuun over time. It appears there are no tax consequences with a LIRA to worry about right now so this may influence things. Any thoughts?
    You've received lots of comments on exploring alternatives to leaving it locked up for a long time, but not much opinion as to what to invest it in in the meantime. As one poster said, it depends on your time frame. If you think you will need to make withdrawals at 55, then you need low volatility and reasonable security of capital. For absolute security, laddered GICs. If you can tolerate some volatility, a conservative monthly income fund. If you are going to leave it invested for 10 years or more, a simple CDN balanced mutual fund is the easiest solution for that amount of money.


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