Locked-In Retirement Account (LIRA)

A Locked-In Retirement Account (LIRA) is a type of retirement savings account that is designed to provide you with a secure source of income in retirement. LIRAs are typically offered by employers as a way to help employees save for retirement.

There are two types of LIRAs:

• Group LIRAs are sponsored by employers and are available to all employees who meet the eligibility requirements.
• Individual LIRAs are sponsored by individuals and are available to anyone who wants to save for retirement.

No matter which type of LIRA you choose, there are a few things you should know:

• LIRAs are tax-deferred, which means that you don't have to pay taxes on your contributions or investment earnings until you withdraw them from the account.
• LIRAs are locked-in, which means that you can't withdraw your money until you reach a certain age (usually 59 1/2).
• LIRAs can be invested in a variety of different assets, including stocks, bonds, and mutual funds.

If you're considering opening a LIRA, it's important to talk to a financial advisor to make sure that it's the right choice for you.

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There are a few advantages to using a LIRA as a retirement savings vehicle. First, LIRAs offer tax-deferred growth. This means that you don't have to pay taxes on your contributions or investment earnings until you withdraw them from the account. This can help you grow your retirement savings more quickly.

Second, LIRAs are locked-in. This means that you can't withdraw your money until you reach a certain age (usually 59 1/2). This can help you avoid the temptation to withdraw your money early and spend it on something frivolous.

Third, LIRAs can be invested in a variety of different assets. This gives you the flexibility to choose investments that are appropriate for your risk tolerance and investment goals.

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There are also a few disadvantages to using a LIRA. First, LIRAs are subject to withdrawal penalties if you withdraw your money early. These penalties can be as high as 50% of your withdrawal amount.

Second, LIRAs are not as flexible as other retirement savings vehicles. For example, you can't use a LIRA to purchase a home or pay for college expenses.

Third, LIRAs are only available to certain people. You must be a Canadian resident and you must have earned income in order to contribute to a LIRA.

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Overall, LIRAs can be a good option for retirement savings. However, it's important to weigh the advantages and disadvantages carefully before making a decision. If you're not sure whether a LIRA is right for you, talk to a financial advisor.