How to get money out of LIRAs

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Q: I have a LIRA and have been told that each province has strict laws on when I would be able to withdraw funds. I am 63 years old and would like to assess some of the money from the LIRA to pay off some debt.—Pete A: LIRAs—or locked-in retirement accounts—are also known as locked-in registered retirement savings plans (RRSPs). They are locked in because the money in a LIRA comes from a defined contribution (DC) or defined benefit (DB) pension plan when you leave your employer. Pensions are meant to be paid out over time, so when pension money goes into an RRSP account, it is locked in to make sure it lasts.

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You are correct, Pete, that there are restrictions on LIRA withdrawals. Typically withdrawals cannot begin before the age of 55 and you must change your LIRA into a LIF (locked-in life income fund) or LRIF (locked-in restricted life income fund) to begin withdrawals. Minimum and maximum withdrawal amounts can be taken each year thereafter according to either your age or your spouse’s age–depending which you choose to base the withdrawals upon when you establish the account. Since you’re 63, you can likely take withdrawals from the account by converting it to a LIF or LRIF. But if you want to take a lump-sum withdrawal, restrictions generally apply on a province by province basis as follows:

One-time unlocking of 50% of LIRA to a non locked-in RRSP
Small balance unlocking below a specific threshold
Withdrawals due to shortened life expectancy (physician certified)
Withdrawals due to financial hardship (subject to specific conditions)
Withdrawals due to spousal or child support (maintenance enforcement orders)

Ask a Planner: Leave your question for Jason Heath » One thing I would caution you to consider is if it’s actually worth taking withdrawals from your LIRA to pay down debt, Pete. If your debt is at a fairly low interest rate like a mortgage or line of credit, the interest rate you’re paying may not be too much different from the rate of return you might be able to earn on your LIRA. But in order to access the LIRA money, you need to pay tax because the withdrawal is considered taxable income. The immediate tax hit on the withdrawal means you’ve got less–and potentially much less–than 100 cents on the dollar to pay down debt. However unsettling the debt may be, it might be better to pay it down over time with your various sources of income, including your LIRA. If the debt you’re looking to pay down is high interest rate credit card debt, withdrawals may be worth considering. But consider other sources first like Canada Pension Plan (CPP) (if you haven’t already applied to receive it), non-registered investments, Tax-Free Savings Accounts (TFSAs) or a home equity line of credit. At 63 years of age, you are less than 2 years away from receiving Old Age Security pension, which is currently up to $6,765 per year of additional income for both you and your spouse. OAS is indexed to inflation and rises each year. In summary, Pete, locked-in funds are only partially locked in. You’re old enough to start withdrawals, though the withdrawals may not be as much as you’d otherwise like to get your hands on. Unless you qualify due to extraordinary circumstances, you may need to draw down your locked-in money slowly, over time. Hopefully there are other sources of funds like other investment accounts, home equity or government pensions that can help make up the difference. Ask a Planner: Leave your question for Jason Heath » Jason Heath is a fee-only, advice-only Certified Financial Planner (CFP) at Objective Financial Partners Inc. in Toronto, Ontario. He does not sell any financial products whatsoever.

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About Jason Heath, CFP

Jason Heath is a fee-only, advice-only Certified Financial Planner (CFP) at Objective Financial Partners Inc. in Toronto. He does not sell any financial products whatsoever.

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Comments Cancel reply

Fred Ross says:

March 25, 2020 at 9:14 am

In these hard times are we able to cash a locked in rrsp.
Due to covid -19.
And the state of emergency invoked by Ontario
Thank You

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Dan says:

April 29, 2020 at 11:10 pm

I would like to unlock some of my lira is thier away I did financial hardship but would like to take half now to be debt free

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Nida Saberon says:

November 10, 2020 at 1:31 pm

My husband has a LIRA he is now 65 years old, Can he start withdrawing it? Please advise what a safe way to do

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1. MoneySense Editors says:
  
  November 12, 2020 at 10:52 am
  
  Due to the large volume of comments we receive, we regret that we are unable to respond directly to each one. We invite you to email your question to [email protected], where it will be considered for a future response by one of our expert columnists. For personal advice, we suggest consulting with your financial institution or a qualified advisor.
  
  Reply
Ahmad Mohamad says:

January 25, 2021 at 12:48 am

There is literally 3 questions in the comments (as far as I can see on here)… why not just answer them?

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mark M. says:

February 9, 2023 at 1:35 pm

A Lira is garbage and if you look at your investment you typically cannot withdraw until you are 89 years of age. The Lira can be converted to a Lif and you can then withdraw 50%, but only a one time deal. the rest cannot be touched but only once a year and it is basically peanuts. I withdrew 50% of my hard earned money and they bloody well raped me on my money because the more you take out the more they take off and then you still have to pay taxes on this afterwords. It is all a scam…

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Brad Balla says:

March 8, 2023 at 3:31 pm

Understood the maximum amount that can be transferred into LIF is 50 %. Now I still have 50 % in the locked in RRSP. If I have all ready transferred 50% which was the max how do I get access to th remaining 50% in the locked in RRSP?

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1. MoneySense Editors says:
  
  March 10, 2023 at 2:20 pm
  
  Due to the large volume of comments we receive, we regret that we are unable to respond directly to each one. We invite you to email your question to [email protected], where it will be considered for a future response by one of our expert columnists. For personal advice, we suggest consulting with your financial institution or a qualified advisor.
  
  Reply
Godfrey Gagnon says:

May 5, 2023 at 6:18 pm

I wanted to find out how to unlock rrsp in TD bank,since 1970

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Ken says:

October 13, 2023 at 8:03 pm

Crisis or not in mb. Cannot draw on my pension monies, they say I just die first. Am 68 and “need” access to save our home. Wife is sick, so needs me home. Could work but really want to spend time with her. She panics when I talk of moving. Also grandson lives here for school reasons he’s 15. Why must we suffer because these funds, (my hard earned monies.), are withheld from us by manitoba gov. This puts me in a bad spot. Just die, if I want my family to access my money Who the hell thinks they have a right to do this under the excuse that they are protecting us from wasting it. Making sure that I leave my pension monies for my son’s to inherit ps up or by a fast car.???

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clyde goldsmith says:

January 15, 2024 at 3:28 pm

i would like to unlock some of my lrif to pay off my debt, i am 82 years. can i do it. about 20,000. thanks in advance

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Jeff Clandestine says:

October 7, 2024 at 10:48 pm

The idea of having your life’s accumulation of “munny” locked up and held for ransom and controlled by an inept/or more likely criminally thieving government~ “for your own good” is ridiculous!!
I will gladly surrender my commuted value pension LIRA to the government in full! In exchange for being tax free for my remaining years! I don’t want any/all of their “services” that I don’t quite qualify for but paid into during my years of slavery.
I would like to close my account with the CRA. I want to be taken off the slave rolls of the corporation of the government of Canada and its assigns.
I’m done working for them for free.
I’m required to fill in a yearly tax return? That sounds like work. I’m not a slave. My charge to the government of Canada for this service is $2,000,000 per occurrence- and I believe the law says I can charge that back for 7 years?
Yeah! I’ve had enough BS.

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