LIRA – Locked-in retirement account

This type of account is created to receive funds from a registered pension plan. The funds are usually “locked” (unless otherwise specified), allowing the account holder to defer taxation on investment earnings until withdrawal. This money must be used to create a lifetime income at retirement. In due course, the amounts contained in the LIRA must be transferred to a life income fund (LIF) or be used to purchase a life annuity from an insurance company.

Advantages of a LIRA

Investing in a LIRA allows you to control your investments until you reach the age of 71. Unlike in an RRSP, the amounts accumulated in a LIRA are locked in and usually can’t be withdrawn until retirement, or sooner under very specific statutory conditions.