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LIRA unlock to RRSP timeframe
August 14, 2023
9:30 pm
NCC1701Z
Lower Mainland
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I always thought I could convert 50% of my Federal LIRA from many years ago to an RRSP.
My bank tells me I should have done it in the 1st 60 days after establishing the LIRA. Is this correct? Google searching seems to indicate I can convert the 50% to an RRSP at any time

August 15, 2023
6:13 am
hwyc
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The first 60 days applied to my *Ontario regulated* LIRA when the plan was converted to LIF. ( I understand yours is a federal regulated plan )

You are allowed a one-time 50% unlock from the LIF account. This means you can request for a transfer of half the account value to an RRSP or RRIF account or just withdraw the money from the LIF.

Is it not true the leading 'L' stands for locked-in? On the other hand, RRSP is not truely locked-in. It could just be wishful thinking, if the unlocking could be done any time.

... so you have the LIRA for many years
... are you approaching your conversion soon?

August 15, 2023
6:17 am
agit
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Your bank is 100% wrong on this

In Ontario you have 60 days to unlock 50% in cash or direct transfer to RRSP from the date "transferring to LIF"

So if your $$$ still in LIRA then open LIF then transfer $$$ to LIF and unlock 50% within the first 60 days note you must be 55 year old

August 15, 2023
7:05 am
cgouimet
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agit said
Your bank is 100% wrong on this

In Ontario you have 60 days to unlock 50% in cash or direct transfer to RRSP from the date "transferring to LIF"

So if your $$$ still in LIRA then open LIF then transfer $$$ to LIF and unlock 50% within the first 60 days note you must be 55 year old  

Very true but the LIF portion is now subject to withdrawals whether you want them or not ... even if before age 71.

CGO
August 15, 2023
7:45 am
MG
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Here is a good resource from OSFI. Check Question 2. Chart with Age 55 and over - One-time 50% unlocking.

https://www.osfi-bsif.gc.ca/Eng/pp-rr/faq/Pages/ulfpp-lrsp.aspx

This was very helpful to me. My big problem was my bank - very few people had a clue on how to arrange this and I was very worried the 60 days would expire before they got their ducks in a row! I was well into 3 branch visits as well as over 10 phone calls to follow up. Good luck!

August 15, 2023
3:26 pm
NCC1701Z
Lower Mainland
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Thanks all.

Called them back (Investors edge) and now they say I can unlock 50% but it seems I must convert the LIRA to a LIF or RLIF 1st, then I can unlock 50% of the of the total into an RRSP. I'm not 71 but over 65 so I have a few years before I have to take withdrawals.

I think when I asked before they though I wanted to keep the LIRA and unlock 50% into an RRSP.

The only reason I want access to the RRSP/RRIF is because of the maximum withdrawal %'s on a LIF unlike a RRIF that has no maximums.

August 15, 2023
3:36 pm
Rail Baron
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NCC1701Z said
Thanks all.

Called them back (Investors edge) and now they say I can unlock 50% but it seems I must convert the LIRA to a LIF or RLIF 1st, then I can unlock 50% of the of the total into an RRSP. I'm not 71 but over 65 so I have a few years before I have to take withdrawals.

I think when I asked before they though I wanted to keep the LIRA and unlock 50% into an RRSP.

The only reason I want access to the RRSP/RRIF is because of the maximum withdrawal %'s on a LIF unlike a RRIF that has no maximums.  

Be careful. Once you have a LIF, you have to start taking annual withdrawals, no matter what your age. If you wait until 71, you can split your funds into LIF & RRSP, and not have to start withdrawing any until then. So only split early if you want money to come out of the LIF sooner.

August 15, 2023
3:41 pm
NCC1701Z
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Thanks. I am aware of mandatory minimums when I start a LIF. I'm planning to accelerate withdrawals beyond the minimums to reduce the potential 53% tax liability on our estate.

August 15, 2023
5:45 pm
hwyc
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At 71, is there a point of unlocking 50% to a RRSP ? Not sure it is still an option.

( ... ok I found the answer from my own post. LIF is locked-in but RRIF is not sf-embarassed )

Since you are over 65, are you already claiming the full $2000 pension income tax credit (Line 31400) ?

August 15, 2023
6:56 pm
Rail Baron
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hwyc said
At 71, is there a point of unlocking 50% to a RRSP ? Not sure it is still an option.

( ... ok I found the answer from my own post. LIF is locked-in but RRIF is not sf-embarassed )

Since you are over 65, are you already claiming the full $2000 pension income tax credit (Line 31400) ?  

I plan to move 50% of my LIF to an RIF at 71, assuming I live that long, just to allow more financial flexibility. If I needed more money pronto, I could withdraw as much as is in the RIF, but the LIF has maximum annual withdrawals. I see no advantage to keeping more of my money under more restrictions as I age.

August 18, 2023
3:57 am
FMC
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I did mine at age 55 for lifetime tax planning/reduction purposes. Before I started I checked to make sure that my financial institution knew precisely what I wanted to do and the process. My pension was federally regulated so I read the information on the OSFI site beforehand and referred the first agent at my financial institution to it as they were giving me incorrect information. After some time they had someone who regularly processes these kinds of transactions contact me. After that things went reasonably smoothly. That's the key, finding someone at your financial institution who has experience in this transaction. I made sure I got all the proper documentation. One may need a notarized document depending on one's circumstances. Once I had all the proper documentation, including the notarized document I initiated the transfer from the L-RRSP to the RLIF. The Federal plan is an L-RRSP, at least mine was. All funds were transferred from the L-RRSP to the RLIF. From the time of conversion, one has 60 days to unlock half the value in the RLIF to an RRSP or RRIF. Well worth it as the RLIF maximum withdrawal rules are highly limiting. I've been withdrawing the maximum and my RLIF continues to grow over time as annual appreciation has been greater than annual maximum withdrawals. As such it may be well worth considering doing well before the year in which one turns age 72 if one's income tax situation isn't too restrictive. Otherwise, one won't get the bulk of their funds until well into their mid to late 80s.

August 18, 2023
7:19 am
agit
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@NCC1701Z also note if the funds in all of your locked-in accounts is less than 40% of the Year's Maximum Pensionable Earnings (YMPE) can unlock all 100%.

you can transfer the difference between the minimum and maximum LIF withdrawals to your RRSP. Note, however, that there is no minimum withdrawal in the first year, so you can simply transfer the maximum.

August 18, 2023
9:21 am
hwyc
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Many comments here are meant for Ontario-based plans. Here is a link from my past research to a TD Wealth good-to-know PDF (2017) for Locked-in Plans in Canada. I would consider it trustworthy if the information therein is still up-to-date. Hope this helps.

August 18, 2023
1:29 pm
Rail Baron
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hwyc said
Many comments here are meant for Ontario-based plans. Here is a link from my past research to a TD Wealth good-to-know PDF (2017) for Locked-in Plans in Canada. I would consider it trustworthy if the information therein is still up-to-date. Hope this helps.  

Many thanks for sharing that link to the TD info publication on LRSP's, LIFs, and their many permutations.

I was chagrined to see that funds locked in under pensions regulated in BC cannot take advantage of the 50% RRSP transfer at conversion to a LIF.

sf-frown

That's disappointing, but good to know.

It might also explain why when I considered converting either my LIRA or my RRSP funds to a deferred annuity, there was a >20% premium to the monthly payout (normalized) for the RRSP funds compared to the LIRA funds. Those restrictions on payout in a LIRA must impact the way the Lifecos can structure the annuity, and reduce the rate at which capital is returned.

Once I saw the difference, I converted my RRSP over to the deferred annuity, invested my LIRA into a 5 year 5.1% GIC and will figure out what to do next when that GIC matures in 2027. I have a hunch that my executor will wind up having to pay taxes on the balance in that LIF some day, unless I live into my 90s.

August 21, 2023
8:29 pm
NCC1701Z
Lower Mainland
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I don't think the majority of us will not have some taxes payable on our LIF's RRIF's, hopefully < 54% but even that is not easy to plan for. The DB pensioners are lucky they don't have to worry about that 🙂

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