# Unlocking Part of a LIRA



## Belguy (May 24, 2010)

Early last year, I became aware of a provision whereby the Ontario government was allowing the unlocking of 50 percent of an existing LIRA.

When I went to my broker to request that this be done, they informed me that I would first have to set up something called a 'New LIF', move the entire amount from the old LIRA to this so-called 'New LIF' and then I could unlock 50 percent by moving it to my existing regular RRSP account.

Little did I realize, until recently, that setting up this 'New LIF' would generate a required annual payout which was set up for me at the minimum annual withdrawal.

What I cannot understand is why the Ontario government, in allowing the unlocking of 50 percent of my old LIRA, forced me to first set up the 'New LIF' for which an annual withdrawal would result? Can anyone explain why to me?

Another result of my actions was that I recently received a T4RIF form for the amount that I ultimately transferred to my regular RRSP--in other words, for the amount that I unlocked. However, I did not actually every get my hands on the amount showing as 'Taxable amounts' in box 16 of the form. That amount was simply transferred from my 'New LIF' to my regular RRSP.

I also received a 'Self Directed Retirement Savings Plan Receipt' for the same amount showing 'Transfer under paragraph 60(L)(V) of a contribution 'in kind'.

My second question is how do I enter this amount on my tax forms? I expect that I have to enter the amount in box 16 on line 115, but how do I show that I transferred this amount to my regular RRSP without ever getting my hands on it?

I would appreciate any assistance that anyone can provide.


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## TaxGuy (Apr 7, 2009)

It's a transfer from one registered plan to another. You report is on Line 11 of Schedule 7. See the tax guide Line 208 and look for line 11.*


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## Belguy (May 24, 2010)

Thank you, Tax Guy!!

I am still wondering why the unlocking of 50 per cent of my old LIRA led me to having to set up a 'New LIF' before I could transfer the unlocked amount to my RRSP, thereby leaving me with the other 50 per cent in the 'New LIF' from which I am forced to take an annual withdrawal.

When they promoted the fact that they were now allowing the 50 per cent unlocking, nobody said anything about also, at the same time, generating an annual minimum withdrawal from the 'New LIF'.

Was setting up the 'New LIF', with minimum annual withdrawals, the only way that I could unlock the other 50 per cent and move it to my RRSP?

Why would the government set it up so that the unlocking would generate a mandatory payout that did not exist before?

In other words, yes, you can unlock 50 percent but you must also start taking a minimum annual payout from the resulting 'New LIF' when such a payout was not required from the old LIRA. (unlocking yes but with resulting annual payout prior to age 71).

What would be the government's thinking behind that or was there a way to unlock the 50 per cent without having to set up the 'New LIF' with it's mandatory payout?

Long winded, aren't I!!


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## sprocket1200 (Aug 21, 2009)

yes, you are. a lira only has limited options for conversion. feel lucky you can get 50% out. it sounds like you were surprised to get the income to put on your tax forms, but that should have been obvious from the start.

the lira and minimum payout gives the govt tax dollars, this is there game, so there are no surprises here.


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## Belguy (May 24, 2010)

And so, in their infinite benevolence, they allowed me to unlock half of my own money while, at the same time, subjecting me to minimum annual withdrawals that I was not forced to take with my original LIRA.

My original plan was to leave my locked in account alone until age 71 and let it gain in value. Now, with the annual mandatory withdrawals, that growth is going to be harder to achieve and the more growth that I can manage to get, the greater the annual payout will be!! 

This is a good example of 'buyer beware' whereby an unlocking of 50 percent led to an unexpected consequence of a mandatory payout that did not exist with the original plan.

One would have thought that the government would want our retirement savings to grow to their maximum so that we were better able to look out for ourselves in our old age.

However, this is evidently is not true as they seem to want to get their hands on the tax money from some of these locked-in monies sooner rather than later.

I am not too happy about this but am angriest with myself for not paying attention to the fine print when I took advantage of the new unlocking provisions.


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## warp (Sep 4, 2010)

BELGUY:

I came across this new option the govt was giving to get 50% out of a LIRA,
( not my LIRA, by the way...i was looking into it for a friend)

I too discovered that there would be all kinds of red tape, and that minimum amounts would then ahve to start coming out yearly as income.

I can see you are upset....and your financial advisor, obviously either had no clue, or didnt inform you.

You ask why the govt would do this....the answer is simple.

THEY ARE IDIOTS

And the TAX CODE is a disgrace, from top to bottm.

Like anything any govt ever does....its a mess.

Everything I see as the years go by, just confirms this to me


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## Four Pillars (Apr 5, 2009)

Unlocking a LIRA account is a huge hassle - I did it for my Dad a couple of years ago.

Belguy - I understand your frustration about having to take out mandatory withdrawals from the LIF account. I do think however, that this frustration stems from lack of knowledge about the process.

The reason most people want to unlock their account in the first place is to "cash in" some of the money. For those people, being subject to mandatory withdrawals each year isn't a problem since they are already withdrawing anyway.

It sounds like you just wanted to unlock part of the LIRA, just for the sake of unlocking it? In that case, it might have been better to wait until you were at the age where the LIRA gets turned into a LRIF. At that point, you'll be dealing with the mandatory payments anyway.

I wrote about the steps necessary to unlock an Ontario LIRA here:

http://www.moneysmartsblog.com/how-to-unlock-an-ontario-locked-in-retirement-account-lira-lrif/


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## Belguy (May 24, 2010)

I didn't want, nor need, the mandatory annual withdrawal. However, I did want to unlock these funds while the government allowed it and before they changed their minds, as governments are want to do.

Looking back at it, the folks at the discount brokerage did not point out to me that I was also triggering a mandatory withdrawal.

When I questioned them on this recently, their reply was "well, didn't you get the paperwork from us" which I had to admit that I did and when I reviewed it, I have to admit that it was explained there.

Even then, I couldn't get it through my thick skull that the way that they did the unlocking was the ONLY way possible and that the 'New LIF' was a necessary part of it thereby generating the minimum annual payout.

Live and learn. Buyer beware and ALWAYS read the fine print.

Thanks to everyone for your interest and responses.


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## Four Pillars (Apr 5, 2009)

The whole locked-in thing is stupid. That's my conclusion.


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## Belguy (May 24, 2010)

I fully agree but we aren't going to change it because the bureaucrats and politicians always know best.

Ya, right!!!


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## warp (Sep 4, 2010)

LIRA, LIF, new LIF , RSP, RRSP, RRIF, RESP, FORM 6, FORM 6.1, DPSP,

RIFF, RAFF, BLAH, BLAH ,BLAH

When will it end??

EVERYTHING the Government does is a DISASTER.

The Income TAx ACT is a ludicrous mess, and ridiculously complicated.

I once told my Councillor in Toronto that we would pay her TWICE her annual salary , if she promised to stay home and DO NOTHING, because whatever they did would just cost us more money in the end.

She just laughed , and laughed.......


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