What are LIRAs and LIFs?

by Achieva Financial
Oct October 04

When it comes to saving for retirement almost everyone knows what an RRSP and RIF is. However, do you know the differences when it comes to LIRAs (Locked-In Retirement Account) and LIFs (Life Income Funds)?  

Here is a brief overview of how they work:

Many employers offer Defined Contribution (DC) Pension Plans. Should a staff member leave their employer, they will often have the ability to keep their money within the company DC plan or to transfer these funds into a personal LIRA. LIRAs are similar to an RRSP, however, the money transferred to a LIRA is ‘locked-in’, meaning you cannot gain access to these funds until retirement, nor will they be eligible for the RRSP New Home Buyers Plan.

Like an RRSP, you can choose how you wish to invest your money within a LIRA. David Mortimer, President of Achieva recommends a GIC laddering strategy, wherein your money in the LIRA is split equally between 1 – 5 year GICs, and maturing funds are then re-invested into a 5-year GIC. “A GIC laddering strategy helps you to maximize returns long-term by ensuring your money is in the highest rate currently available,” he says. “This strategy also helps hedge against inevitable interest rate declines.”

In your 71st year, you are required to turn your LIRA into a LIF, and begin drawing a retirement income. Like a RIF, there is a minimum income you must take annually, however unlike a RIF, there is also a maximum income you cannot exceed from your LIF. This maximum income helps to prevent you from depleting your savings too quickly throughout your retirement.

Achieva Financial has the ability to assist with all your retirement savings needs whether it is RRSPs and RIFs or LIRAs and LIFs – for more information, contact our Customer Support Centre