# LIRA questions



## curioso (Nov 22, 2018)

Hey everyone. So, I got a few questions about how a LIRA works exactly, and am somewhat confused about something that should otherwise be pretty simple. As far as I know, a LIRA account does not allow contributions (unlike RRSPs) but it also does not allow withdraws until you convert it to a LIF (age restrictions apply). So, if I were to use (in this example Im using a random number just to make a point) a 100k pension transfer to purchase an ETF that pays 2% dividends, what happens?

The 2% dividends cannot be reinvested, if the LIRA does not allow contributions?

The 2% dividends cannot be withdrawn, if the LIRA does not allow withdraws?

Im pretty sure it is a dumb question... I must be missing something. Is the limitation on withdraws only related to the principal amount, and not payable dividends? Maybe a DRIP setup would not be treated as "contributions"?

Thanks in advance.


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## afulldeck (Mar 28, 2012)

Treat it the same way you treat the RRSP. This is a lock-in investment vehicle, all monies generated by the investment are consider to be part of the LIRA. CASH generated by the LIRA asset dividends can be invested as you see fit.


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## MrMatt (Dec 21, 2011)

Also LIRA/LIF rules vary by province.

But like RRSPs it's the account that matters.

If you hold a Stock/ETF in the account, and it pays dividends, those dollars get deposited within the same LIRA account and you can reallocate those funds however you wish.
Similarly if you sold the stock, the funds would remain inside the LIRA.


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## Eclectic12 (Oct 20, 2010)

curioso said:


> ... As far as I know, a LIRA account does not allow contributions (unlike RRSPs) but it also does not allow withdraws until you convert it to a LIF (age restrictions apply) ...The 2% dividends cannot be reinvested, if the LIRA does not allow contributions?
> The 2% dividends cannot be withdrawn, if the LIRA does not allow withdraws?


Contributions are money/investments being put into the account while withdrawals are removing them from the account. Everything that happens within the account is generated by the account so it is not a contribution. That's whether it is dividends/interest paid or proceeds from selling/other company buyouts of investments.

There is no restriction (beyond whatever the account allows) for reinvesting or leaving as cash dividends paid.

Keep in mind that the RRSP, LIRA and TFSA are the same for contributions/withdrawals being movements in/out of the account. Where the LIRA is different is that only pension proceeds can be put into the account and only by transferring to a LIF can withdrawals start to be made. RRSPs and TFSAs allow direct withdrawals. For all three accounts, what happens within the account is not a contribution nor a withdrawal.




curioso said:


> ... Is the limitation on withdraws only related to the principal amount, and not payable dividends?


The withdrawal rules apply to both principal and any growth (ex. dividends paid). The mistake you are making is in considering dividends as contributions. As an analogy - where your bank pays your savings account interest, would you say you contributed to the account?


Cheers


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## curioso (Nov 22, 2018)

Got it ! Much appreciate the replies provided.


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## Eclectic12 (Oct 20, 2010)

FWIW ... because I left two DB pensions that were under the same pensions authority, instead of creating a second LIRA - I was able to send the proceeds of the second pension to the same LIRA. Allowed contributions aren't likely to be all that often but the "no contributions are allowed" is referring to personal contributions instead of proceeds from pensions.


Cheers


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## MrMatt (Dec 21, 2011)

Eclectic12 said:


> FWIW ... because I left two DB pensions that were under the same pensions authority, instead of creating a second LIRA - I was able to send the proceeds of the second pension to the same LIRA. Allowed contributions aren't likely to be all that often but the "no contributions are allowed" is referring to personal contributions instead of proceeds from pensions.
> 
> 
> Cheers


I believe when you said "same pensions authority", you meant basically the same province, not necessarily the same company or pension provider. 
I think it's pretty standard that you can combine multiple LIRAs in that situation.


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## Eclectic12 (Oct 20, 2010)

Yes .. it is not the same company or pension provider but the pension regulator. 
Ten of eleven times it will be the province but in the eleventh case, it is the Feds.

I mentioned it as people I have talked to seem to be under the impression that each pension has to have it's own, separate LIRA. In my case, I skipped the combination of multiple LIRAs by contributing the latest CV proceeds to the existing LIRA.

Interestingly, with how much time has passed the broker was asking me what pension regulator the original pension/LIRA were under.


Cheers


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