LIRAs Explained: EVERYTHING You Need To Know About Locked In Registered Accounts

hi my name is adam welcome to the channel thanks for joining us today today we're going to go through a much anticipated video one that's been requested maybe more than any other one and that is lyrics or lyra's as some people pronounce it but the locked and registered account so in this video we're going to go through five different things so we're going to cover what a lear is the difference between a lyra and an rrsp we're going to go through how you can get money out of your lira early like before retirement how do you get it out then we're going to go through when you hit retirement what happens to your lira and also what's unlocking okay a lot of you have heard okay i know i can unlock depends where you live we'll cover that in this video and then the last thing we have some strategies that we use when we build out a financial plan if you have a lira you're going to want to stay tuned for that because we have some tips and tricks that we use with our clients that are really successful so we'll cover that in this video as well so let's jump into it what is a leader a locked in registered account a lyra is a registered account much like an rrsp but a lira has come from a a pension plan a company pension plan so somewhere where you used to work they had either a defined contribution or possibly a defined benefit plan and you've taken that out when you left the company for whatever reason it is whether it's retirement or early retirement or you've moved on to a different employer and you've you've had to move that money out of the company pension plan you have to move that into a lira okay you you're unable to move that to an rsp you have to move it into a lira account so that's essentially how you get a lear in the first place it's from an old defined contribution or defined benefit pension plan from a previous employer so a locked and registered account is designed to be a long-term income generator in retirement okay and that's why the federal government has basically said look if you've moved from a defined contribution or defined benefit plan which are built as pension plans ongoing you know monthly pension payments to you in retirement if you leave that plan you need to put it in a a similar product or a similar solution and that's what aller is the leader is built to kind of build up to retirement and then when you hit retirement to give you an ongoing income stream okay now you can invest your lira just like you do your rrsp your tpsa or any other investment account okay you can put it into a high interest savings you know invest very safe no market risk or you can put it into stocks bonds etfs um you know whatever you want to put it into whatever your risk criteria is but you can invest it much like any other account okay we've had that question a lot too like can i do anything with my lira yeah you can invest it grow it and hopefully you do you typically your rrsp and your lear if you have both typically those investments in the investment risk and structure is fairly similar to each other okay there's similar accounts you know you want to grow these up to retirement so if you have both accounts or if you've had an rsp and you like it and it's working well for you and all of a sudden you have this lyra to come in you may want to consider investing it much like your rsp if that kind of meets your risk criteria so talk to your investment professional uh you know do kind of an online uh risk assessment to see kind of where you fall within that platform now the last key point on the lira is every lira is registered in either a province or a territory now if you're federally uh regulated it's going to include the territories as well okay so all 10 provinces and then you have your your federal legislation or federal registration and that includes the territories okay now now that's very important okay where your leader is registered is one of the most important parts of that lyra okay and we're going to cover why later in this video but you want to know where your leader is registered and just because you worked in bc and you're you know your company was based in bc it doesn't mean it's a bc lira okay it could be a federal leader it could be an ontario lira you need to understand where that lira is registered because that's going to allow you to unlock it and things you can do down the road okay so let's jump into the difference between a lira or locked and registered account and rrsp a retirement savings plan okay they're very similar but there's some differences that i want to cover in this so first off the lira is locked in your rrsp is not locked in if you built up an rsp and you hit 50 and you have an emergency you can pull the whole thing out it's taxable to you but you have access to the full amount okay minus taxes with a lira you can't do that okay you can't say hey you know i want to buy the new ski boat or do this or do that you know upgrade my home that lyra is locked in it's a locked in registered account okay you're unable to access that now we'll go through in a second there are some a few ways not many a few ways to get it early but in general 99 of you will be unable to unlock or get money out of your lira before retirement so an rrsp and alera are very similar in the fact that when you hit retirement so when you start drawing money out of these accounts so you convert your rrsp to a riff and you convert your lira to a lift a life income fund okay when you do those conversions either way there's a minimum amount that you have to take out and that's based on your age okay so when you hit a certain age let's say you're 60 years old you have to take with a certain amount so the minimum amount at age 60 is going to be 3.33 okay so on an rsp or a lira when you convert them to kind of an ongoing income stream uh a riff or a lift you have to take out three point three three percent so if you have a hundred thousand dollars that's you know thirty three hundred thirty dollars take out of there now the differences on an rsp there's no max you could take out the full 100 000 it's going to be taxable to you but you have access to it when you convert to a lift you have a maximum amount that you can take out and this is very very important okay so in a lift depending if you're like what province uh your lift is registered in or if it's federal you're gonna have to take somewhere between six and seven percent it's the maximum amount you can take out of there okay so again a lift you have a minimum and a maximum with an with a riff you have a minimum and no maximum okay there's more boundaries on that lyra or a lift when you convert to start taking income out of it okay so when you hit retirement age if you have both an rsp and a lira basically what happens is when you need to start drawing money out of either or both of them your rrsp will convert to a riff a retirement income fund and your lira will convert to a lift a life income fund so now let's quickly jump into a few ways that you can get your lira out early and again this applies to maybe one percent of you um so i'm just going to fly through it we'll put more details below we'll put a link below with more details but essentially there's just a few ways that you can get money out of there early so if you have a reduced life expectancy that's one way if you become a non-resident that's a second way if you have financial hardship that would be a third way or if your lear is a very small amount and again all four of these have parameters around them to go more into detail if you think you might fall into one of those again we'll link it below you can read more into it and see if you qualify for any of those four but i will say it's it's probably less than one percent of you that would actually qualify to unlock your lira early so probably not likely but again if you think you fall into one of those non-residents probably the number one reason um but we'll put the link below you can read more about that so what happens to your lira when you hit retirement age or maybe even a bit before retirement okay so basically like i mentioned earlier you you convert your lira to a lift a life income fund and that's basically the you know conversion and again you know it's not selling stocks or selling your mutual funds or etfs or whatever you own in investments and buying something new it just rolls over naturally much like an rsp to a riff it's just basically you're changing the umbrella okay so it's sitting under a lyra when you're ready to start taking income out of it you move it over to a lift but the investment kind of just transfer over as there okay no big change there so you can either go to a lift a life income fund or you can convert your lira to a life annuity which is basically an annuity which is something that pays an ongoing monthly or annual or you know bi-weekly however you want the payment set up it just it's an ongoing income stream okay it's a guaranteed income stream it's a set rate and it just pays it for life it's much like a pension plan now typically especially right now um annuities pay a very small rate like the interest rates are really low right now so annuities probably aren't your best bet but do your due diligence to see what you know it's the right fit for you i do have a video coming in a few weeks on annuities so if you want to learn more about annuities i'll be doing a video on that in a few weeks from now we're going to cover all the types of annuities if they make sense right now and kind of they do make sense in some situations we're going to cover that in that video as well so that's coming out in a few weeks so stay tuned for that before i jump into the main part of this video and the you know the details that most of you are looking for i just want to you know stop for advertising on just kidding it's uh if you haven't joined our uh channel if you haven't subscribed hit the subscribe button below we want you to be part of the channel still most of you watching our videos uh are not subscribed to the channel hit the subscribe button it takes one second it costs you nothing and if you enjoy these videos if they're giving you the content you need and helping your retirement plan hit the thumbs up it really does help get these videos out to more people it's that youtube algorithm which is a really weird thing but does help get our videos out and more canadians need better financial literacy financial content content and just information around retiring and that's what this channel provides so if you enjoy these videos please hit the like button um hit the subscribe if you're not joined and share these with people we do appreciate it so if you've come to the point in your life where you know you've built up this lira and your time to you know start taking money out of it or you know in general you're past 55 whether you want to take money out or not you could start to look at converting to a lift and start taking money out now there's this big factor this big you know elephant in the room and that's unlocking okay you can unlock part or all of your lyra depending on which province or territory you live in okay and this is very important we're gonna put a link below so parallelwealth.com lira you're going to find all the information on this we'll have graphs and downloads and links and all the information you need to have but essentially depending on what province you're in or territory in you're able to unlock again none some or all of your lyra when you convert it to a left okay so if you're in bc if you have a leader in bc and you want to convert to a lift and start taking out you can unlock none zero bc is actually in my opinion the worse you can't unlock any of your lyric currently hopefully this changes down the road um but you're unable to lock it unlock any of it if you move to alberta you're allowed to unlock 50 percent okay um if you go all the way to manitoba you're allowed to lock just recently changed on october 2021 you can now unlock 100 it was 50 now you're at 100 saskatchewan is also 100 okay um if you have a federal lira it is 50 and again ontario is 50 as well so most allow some unlocking some not at all so step one would be to figure out what your uh the legislation is or the registration is behind your lyra figure out what province or territory it's in is it federal or is it a provincial which province is registered in okay that's step one step two is then click the link below again parallelwalk.com lira and find your province and then scan over and see if you can unlock if you can then what age you're gonna unlock okay and basically what unlocking is i guess this is where the confusion lies unlocking isn't you know getting all the money out tax for fifty percent of it up tax free unlocking is moving let's say let's say you live in ontario which i know a lot of our viewers do okay unlocking you know when you convert it from a lyra to a lift so let's say you're 55 60 65 doesn't really matter as long as you're past that 55 you convert to a lift when you do that process you want to move 50 of it to an rrsp so unlocking your lira moves whatever amount you're allowed to unlock to an rrsp okay it doesn't mean you cash it out it's tax free or it's even taxable you just move it to an rsp now once it's in an rrsp technically you could cash it out and pay the tax on it sure but again if you're able to unlock and again bc quebec new brunswick some of these provinces you can't unlock anything okay but most you can't okay so check which province or territory you're registered in and hopefully you can unlock okay again saskatchewan manitoba are your two best right now so if you have a lyra there you're able to unlock the full amount in rrsp and again the unlocking is just moving that percentage to an rsp let's make that very clear okay a lot of you get confused by this so when you hit a point where you can move your lyra to a lift if you're unable to unlock any of it make sure you do the full amount unlock the full amount that you're able to 50 or 100 and just move that allocation to an rsp okay now why do you want to do that why do you want to unlock money well like i mentioned earlier an rsp and a lira are similar when you convert it to uh income generation okay so a riff and a lift very similar except that your lift which comes from the lira your lift has that maximum amount okay now what does that mean it means that you're you kind of have parameters when you're in retirement to draw income out of there if you need a big lump sum out of there you can't get it you can do that out of an rsp okay so as much as we can get out of that lyrics on rsp or out of that lift to eventually a riff we want to do that because it creates way more flexibility income flexibility all that in retirement and i should say i mentioned new brunswick earlier on no unlocking there is a bit of unlocking provision for new brunswick nova scotia and newfoundland have zero percent so quebec um nbc as well so there are a few that have zero some have 50 some have hundreds so let's just make that clear again the links below um you know click the link look at the chart see where you fall within your registration your lira and if you're going to unlock any of it but again if you're able to unlock i can't stress this enough you want to unlock it you do that when you hit a certain age when you convert from a lira to a lift when you want to start drawing money out of it that's when you do this whole process okay so let's say you have a hundred thousand in a lira and you're in ontario okay and you're 60 years old looking to retire and want to start drawing an income you basically of the 100 000 in a lira you go to you know your investment person or you know bank or wherever you invest wherever you hold that account and say look i want to convert to a lift and i want to unlock the 50 i'm able to okay so 50 000 of that would go to a lift life income fund and 50 of it would go to an rrsp which you could then convert to a riff so in the last part of this video i want to go through three strategies that we use with our clients that really kind of maximize a learn maximize a lift as much as you can again there's a lot of parameters on these accounts so you want to make sure that you're planning ahead and using these accounts properly especially when you start drawing money out of it how do you do it timing all that kind of stuff so i want to go through three tips that we use with our clients that have really helped them kind of maximize their lyra so tip number one and i said this earlier is to make sure you unlock the maximum amount if you're able to unlock you know if you're in manitoba saskatchewan unlock the whole thing when you hit retirement and start drawing in income you should not have a lift anymore it should all be in an rsp or a rip at that point okay unlock as much as you can whether it's 50 or 100 percent get as much as you can over there on an rrsp it creates way more flexibility for cash flow doing the rsp meltdown a lot of the tax strategy that we'll employ within a plan is built on the rsp and having that lift that life income fund really kind of puts parameters on the ability to melt down your rrsps so the second tip is you want to start drawing down the maximum amount out of your lift as quickly as possible okay so when you hit retirement that needs to be the number one account that you start drawing out of okay so if you have an rsp let's say you have a hundred thousand rsp hundred thousand in uh uh a lyra and you convert them to a riff and a lift you wanna start drawing down that lift at you know maximum amount and then top it up with the the riff now if you don't need all that money maybe hold off converting your rrsp to a riff so that you you're not forced to take some money out of there just do the lira first so lyric to lift should be the first conversion to a retirement income stream because you have that cap on the maximum amount to take out you want to convert as early as possible to start redeeming that maximum amount it's hard to kind of get your lift zero by your mid to late 80s right a lot of lifts will run into your 90s so start early and start the maximum amount as quickly as you can so the third tip for retirement is if it makes sense and i'll go over that in a second here but if it makes sense move your lira to a lift any time after 55 in alberta you can unlock as early as 50 but most provinces and the federal uh lira's you can unlock from 55 on so if it makes sense for you if you're in a low tax bracket right now maybe you you're working part-time maybe you're not working at all you want to start drawing this as you know as early as possible okay so whether you're going to unlock or not you want to convert to a lift and start taking out that maximum amount or up to that maximum amount depending on your other income okay so again if you're not working or you're working part time you want to start taking out top up your income a bit okay if you're paying in a low tax bracket now if your income in retirement is going to be the same as it is now then start taking some of that that lift out now now for some of you in retirement your income is going to be higher than it is now okay then definitely start drawing down that maximum amount of that lift account as possible okay if you're going to be in a higher tax bracket later than you are now which a lot of you fall into um start drawing that down now take it at a lower tax rate pay the tax and kind of move forward but essentially what you want to do is as soon as it makes sense convert to a lift past age 55 and start drawing down up to that maximum amount now remember you have a minimum amount so if you have a really big lira that you have to convert to a lift like if you're in bc we've had this you know a client with a million dollar lira well if you convert to a lift right it's 100 goes to left you can't unlock any of it so now you have a million dollar lift that you have to start taking a minimum amount on depending on your age you might be forced to take you know three four percent well now you're taking 30 or 40 000 of income and you have to okay so just be aware of that you may you know if you're in a province where there's zero unlocking like we see you might want to unlock part of it not the whole thing or just be careful of that okay remember there's a minimum as well there's also that maximum so just be aware of that if you have a really big lyra especially if you can't unlock it just be aware of that minimum amount you don't want to convert at 55 the whole million dollar lira have a bit of an income and be stuck taking way more income than you want to take so hopefully this video cleared up a lot of the confusion around elira again we're going to put a link below click on there it's it's a web page um that we built it covers all you know everything we've talked about today will be on that web page so if you need you know links if you have an alberta pension what can you do with it you know we'll put a link there um that you can kind of click on follow through learn more about it liras are very confusing and the pension legislation behind them can be very you know long-winded sometimes so hopefully this kind of summarizes it okay essentially the lira comes from a defined contribution or defined benefit plan get an old company pension plan that's why you have a lear in the first place okay you build it up like an rsp when you hit retirement age or at a point where you want to start taking a bit of retirement income out then you're con converting it from a lira to a lift okay that's the conversion much like an rsp rsp to a rift a lira goes to a lift a life income fund now again certain provinces territories you can unlock 50 or 100 percent of it to an rrsp okay unlocking just moves you don't have to go to a lift you can go to an rrsp which eventually would go to a riff okay so keep that in mind now hit retirement you convert it to a lift there's a minimum and there's a maximum that you have to take out you have these parameters and that's why leers are not a great account in retirement but again a lot of you have it because you had a pension plan right you're forced to have it and that's fine hopefully it's legislated in a province or territory where you can actually unlock 50 or 100 of it but if not make sure you have a good plan around that okay again this is a kind of a parameter uh investment account we call it where you have that minimum maximum it needs to be built into your overall financial tax plan quite strategically they're a lot harder to draw down they need to complement and again you want to start drawing that down as much and as early as possible when it makes sense from a tax perspective so again hopefully this helped again click the link below there's more information there thanks for joining us in this video we'll see in the next one

Channel: Parallel Wealth

Views: 39,330

Keywords: Financial Planning, Retirement Planning, Retirement, Investing, Savings, Passive Income, RRSP, Wealth, Parallel Wealth, LIRA vs RRSP, LIRA Explained, when will my LIRA unlock, unlocking your LIRA, locked in registered accounts explained, LIRA to LIF conversion

Id: C5NUY_mW35c

Length: 20min 30sec (1230 seconds)

Published: Tue Nov 09 2021