What should people who have LIRAs know about the account?
People need to understand the withdrawal restrictions. In most provinces, the minimum age to remove money is 55 and you can keep the account open as late as the end of your 71st year.
That being said, Canadians don’t actually receive benefits directly from their LIRA. They have to transfer the funds into something called a Life Income Fund (LIF). There are different types of LIFs but, generally, a LIF has a maximum amount that you can take out every year, which is imposed by provincial legislation. The reason LIFs have a maximum payment amount is to ensure you’ll have money in there for your lifetime.
The annual maximum amount is based on your age and the value of the LIF. Thus, your income from the LIF will be dependent on the investment performance of your account. An alternative to the LIF is to use the LIRA assets to purchase a life annuity contract, which will provide you with a fixed amount for the rest of your life.