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Difference between LIRA and Locked-In RRSP

Difference between LIRA and Locked-In RRSP

If you’re nearing retirement, it’s important to know the difference between a LIRA and a Locked-In RRSP. A LIRA is a type of retirement account that allows you to hold onto your investments when you leave your job or retire. A Locked-In RRSP, on the other hand, is an account designed specifically for retirees. It comes with restrictions on how you can use the money in the account, which can be helpful if you’re looking to avoid tax penalties. Knowing the difference between these two types of accounts is essential for making informed decisions about your retirement savings.

What is LIRA?

LIRA retirement savings accounts are a great way to save money for your future. A LIRA allows you to contribute up to a certain amount each year, and the money in the account grows tax-free until you withdraw it.

  • This can be a great way to maximize your retirement savings, as you won’t have to pay any taxes on the growth of your investment.
  • Additionally, LIRAs are typically very flexible, allowing you to make withdrawals at any time without penalty. This can be helpful if you need access to your money for an unexpected expense.
  • Overall, a LIRA can be a great option for retirement savings and is well worth considering if you are looking to maximize your savings.

What is Locked-In RRSP?

A Locked-In Retirement Savings Plan (RRSP) is a type of savings plan that is restricted in how it can be used. Contributions to a Locked-In RRSP are made from sources such as employment income, pensions, and lump-sum payments. The funds in a Locked-In RRSP cannot be accessed until the account holder reaches a specific age, typically 55 or 65. There are generally two types of Locked-In RRSPs:
– employer-sponsored plans
– individual plans

Locked-In RRSPs offer many of the same advantages as regular RRSPs, such as tax-deferred growth and the ability to withdraw funds at a lower tax rate in retirement. However, there are also some disadvantages to consider, such as the loss of flexibility and the possibility of penalties for early withdrawal. Overall, Locked-In RRSPs can be a helpful tool for saving for retirement, but it’s important to understand the pros and cons before you decide if one is right for you.

Difference between LIRA and Locked-In RRSP

  • LIRA and Locked-In RRSP are two types of retirement savings account in Canada. LIRA is a Registered Retirement Savings Plan (RRSP) that is locked-in, meaning that the funds in the account cannot be accessed until retirement.
  • A LIRA can be converted to a Locked-In RRSP, but the funds in a LIRA must remain invested until the individual reaches at least 55 years of age. A Locked-In RRSP is similar to a LIRA, but the funds can be accessed sooner, typically after 10 years.
  • However, early withdrawals from a Locked-In RRSP may be subject to penalties. Both LIRA and Locked-In RRSP are tax-sheltered accounts, meaning that contributions are made with pre-tax dollars and growth is not taxed until withdrawal. With both types of account, it is important to carefully consider withdrawals, as they may be subject to penalties.


LIRA and Locked-In RRSP are two different investment vehicles that offer tax benefits. It is important for investors to understand the difference between the two before making a decision about which one is right for them. We hope this article has been helpful in explaining the key differences between LIRA and Locked-In RRSPs.

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