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LIRA & LIF

/ Investment Account Types, Financial Orientation

The next section of the Action Financial Group Orientation Series will deal with Investment Account Types.

An account is not an investment; it is a container that holds one or more investments. Different containers have different features such as size, shape or colour, one hole in the bottom or none, a lid or no lid; different accounts have different features too, such as tax treatment, size limitations, or rules about contributions and withdrawals. Not all accounts are suitable at different life stages or circumstances and it’s always best to seek advice.

Locked in Retirement Accounts

LIRA = Locked in Retirement Account is an RRSP where the funds came strictly from a pension plan. Depending on whether the originating pension was a provincially or federally regulated pension, different rules can apply. LIRAs cannot be comingled with other LIRAs if the funds came from pension plans under different jurisdictions. You cannot create or contribute to a LIRA unless you have a pension plan that you are leaving, and can transfer the pension funds into the LIRA. You cannot withdraw money directly from a LIRA, and you cannot convert a LIRA into a LIF until “normal retirement age” as defined by the originating pension, usually age 55.

Life Income Funds

LIF = Life Income Fund is to a LIRA what a RRIF is to an RRSP. The LIF originated with funds in a pension plan, that were transferred into a LIRA, and upon retirement, are converted to a LIF. One difference from a RRIF is that the withdrawal from a LIF each year is limited to a maximum amount as calculated by a formula established by the Pension Benefits Act. The CRA dictates the source withholding tax on LIF payments. The required withholding tax may not be the correct amount of tax when all your other sources of taxable income are considered. When you file your annual income tax return, the withholding tax is reported and along with all other taxable income, deductions, tax withheld at source, your tax return is calculated and either a balance owing or a refund is determined.

We will be touching on more Investment Account Types next week—stay tuned! We hope you will find this information valuable and will increase your financial confidence. You can always find these articles on our website www.actionfinancialgroup.com.

Karin Rimnyak, CERTIFIED FINANCIAL PLANNER®
Investment Advisor
David Dryburgh, CERTIFIED FINANCIAL PLANNER®
Investment Advisor
Ian Barrie, CERTIFIED FINANCIAL PLANNER®
Investment Advisor


This information has been prepared by Karin Rimnyak who is an investment Advisor for iA Private Wealth. Opinions expressed in this email are those of the Investment Advisor only and do not necessarily reflect those of iA Private Wealth. iA private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. iA Private Wealth is a trademark and business name under which iA Private Wealth Inc. operates.

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iA Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. iA Private Wealth is a trademark and a business name under which iA Private Wealth Inc. operates.

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