Is there anyway to transfer my LIRA to RRSP or use for mortgage payment? | RRSPs and RRIFs | Discussion forum

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Is there anyway to transfer my LIRA to RRSP or use for mortgage payment?
March 6, 2023
5:08 pm
Save2Retire@55
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So, I was naive and was told by my HR (more than a decade ago) that LIRA is the same as RRSP so I contributed and it is worth ~ $23K now. The GIC is with Oaken currently (initially a Manulife mutual fund years ago).

The GIC is up for a renewal next year. I am wondering if:

1. Is there a way that I can transfer this LIRA to a normal RRSP account and invest?
2. Withdraw to pay mortgage (not down payment) and then contribute back as RRSP (instead of LIRA)?

I can't find a good source online answering this question and I am pretty sure asking Oaken Financial won't help as they can easily say "Not Possible, Sorry"!

Thanks.

March 6, 2023
6:18 pm
mordko
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Not at your age. At 55 you can if its still small (might be some variance depending on province and type of LIRA).

By the way, you can’t “contribute” to a LIRA. You contribute to a work pension scheme. If you quit then one of the options is to transfer to a LIRA. Its pension money, hence “L” = locked. Otherwise similar to an RRSP.

March 6, 2023
6:26 pm
Loonie
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I believe mordko is correct on this. I had a LIRA once and couldn't do squat with it for ages. It was only low four figures! Big nuisance.

March 6, 2023
7:31 pm
MG
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It all depends on whether you have a federally regulated or provincially regulated LIRA. There are different rules governing each and, if provincial, different rules based on which province. You will need to investigate.

March 6, 2023
7:57 pm
agit
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Save2Retire@55 if you are under 55 no way out just forget about it until then.

ie.. If you are 55 or older in Ontario with 23K in LIRA then yes all can be unlock under rule "less then 40% of YMPE"

March 6, 2023
9:01 pm
Loonie
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It's true that it depends on fed/prov registration, but I'd be very surprised if any of them allow this before age 45 or 55.

As you probably know, it's possible somehow to borrow from RSP (I think - i never did this), but LIRAs are much more sticky with rules.

March 6, 2023
9:13 pm
phrank
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One great thing about LIRAs in ONT is when you convert them to an RRSP, you don't need any RRSP room to do so. The RRSP room is created by the LIRA itself.

It is actually pretty easy to understand what you can do at the ONT authority website:

https://www.fsco.gov.on.ca/en/pensions/lockedin/pages/nonhardshipunlocking.aspx

I highly recommend you read the info on this site to learn what you can do. You'll find that unless you're dying soon or experiencing some sort of hardship, you can't touch the LIRA until you're 55.

March 7, 2023
7:43 am
Save2Retire@55
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Thank you, all. The LIRA is locked with NS but I am a resident of QC. I think the rules are the NS rule which says not until 55. Oh well. Just going to move it from Oaken to Outlook.

Lock in 5 year for 4.85% at least that's very close to my mortgage rate 4.99% and hopefully it will be higher than my mortgage rate in 3 years.

March 7, 2023
3:35 pm
Loonie
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... but you have to pay tax on that 4.85, alas.sf-frown

I don't think there's any reliable way to make debt taste better. Just pay it off as soon as possible, as you are doing.

March 7, 2023
4:26 pm
mordko
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Loonie said
... but you have to pay tax on that 4.85, alas.sf-frown

I don't think there's any reliable way to make debt taste better. Just pay it off as soon as possible, as you are doing.  

You pay tax on withdrawal on the total amount because they are deferring taxation. So the interest on “your” money isn’t taxed; its just that some of the principal in that Lira belongs to the government and they’ll take the interest on that portion.

There is an argument that mortgage debt is good for young people if they are investing but if they are just getting GICs then yeah… No point carrying debt.

March 7, 2023
9:57 pm
Loonie
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Yeah, I'm well acquainted with the deferral argument. I don't think it makes any real difference in this situation

OP will have to pay tax on the total amount on his LIRA/LIF sooner or later, and the rate will likely be higher if he could cash it out now than if he waits until retirement.
As long as there is also debt which he is paying down with after-tax dollars, he loses, with the major offset being increased property value if that occurs. Depending on tax bracket, 4.99% could easily be 7%+ in earned income. I wouldn't recommend gambling the market in hope of winning over 3+ yrs while carrying this debt, but I have no doubt that some would.

March 8, 2023
5:20 am
mordko
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Its not “gambling”. Gamblers lose money. On average and individually with a very high probability. People who invested enjoyed long term average return of 10%. No guarantee future will be like the past but it’s nothing like “gambling”.

Agree that putting money into unreg while carrying a mortgage does not make sense. Investing within TFSA/Lira/rrsp would be different and returns should be compared vs mortgages rate rather than rate plus tax.

March 8, 2023
7:14 am
Save2Retire@55
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Unfortunately, it seems there is absolutely no way (considering no hardship or need for the money) of withdrawing the LIRA now. It is locked till 55. Oh well.

Maybe I just open a self-trading LIRA account with Questrade for this small $23K and buy dividend growth stocks (Canadian banks, telecom, utilities, railroad to name some) and even the dividend ETF $VDY. Its 12-mth trailing yield is 4.22%

Hopefully, it grows in the following 5 years too. Even a modest 2% annual growth means I'll have more money versus a GIC. But yes, the 2% isn't guaranteed but very likely to happen.

March 8, 2023
7:39 am
mordko
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- Be careful picking stocks and niche ETFs. Picking stocks increases your chances of losing money unless you know what you are doing. A broad ETF is generally the way to go.
- If you invest in the broad market you are likely to make money over 5 years but you should consider a longer time horizon to improve your odds further. In fact, you have to with a Lira.
- Presumably this isn’t your only pot of money. Consider looking at your overall portfolio rather than pot by pot.

March 8, 2023
7:46 am
Save2Retire@55
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@mordko - Thank you. Of course this isn't the only money I have & yes I have been a self-investor (directly) for a couple years and my portfolio is slightly doing better than the market ETFs but yes I love $VDY which makes life much easier.

Especially with Questrade, free to buy ETFs (vs. $4.99 to purchase stocks) so it is a no brainer. 1 ETF $VDY, enable DRIP, and forget about it until I am ready to withdraw (LIF probably) which is more than 2 decades from now.

March 8, 2023
11:47 am
Loonie
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mordko said
Its not “gambling”. Gamblers lose money. On average and individually with a very high probability. People who invested enjoyed long term average return of 10%. No guarantee future will be like the past but it’s nothing like “gambling”.

 

Yes, I knew you'd object to the word "gambling". The odds are just better than at the casino.

I will continue to call it what I want. You can call it whatever you want. "Investing" sounds more sophisticated, no doubt.

March 8, 2023
1:02 pm
mordko
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Yes, odds are the difference between gambling and investing. A very important one.

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