LIRAs and Annuities

Annuities are contracts between the purchaser and an insurance company, under which the purchaser makes a lump-sum payment and the insurer agrees to make periodic payments beginning on a fixed date. The payment amount is determined using payment frequency, the original investment, the type of annuity option and the age/sex of the annuitant/beneficiary. Straight Life Annuity: Provides an annuity for the duration of the customer's life.


Life Annuity with Guaranteed Number of Payments: Similar to the Straight Life Annuity, provides guaranteed payments (five, 10, 15 or 20 years) even if the annuitant should die early into their contract.


Joint and Last Survivor Annuity: Provides income for two people. It ensures that the surviving annuitant has a steady flow of income until they pass away.


Fixed Term Annuity: Provides guaranteed payment amount based on a term of five, 10, 15 or 20 years with payments not exceeding the chosen term. In the event of death before the end of the term, the payments will continue to be paid to a named beneficiary or the estate.


An individual has the option of converting their Registered Retirement Savings Plans into a Registered Retirement Income Fund (RIFF) at any time prior to age 71. It is mandatory to convert to a RIFF or annuity by the end of the year in which they turn 71, or cash out in a lump sum and bring the entire amount into taxable income. This part of the tax law takes care of the needs of taxpayers at the top end of the age/income spectrum who are beyond the “normal” age of retirement but have the option or ability of continuing to earn a good income from employment and want to continue working. Their investments inside a RRIF grow in a tax-deferred manner just as they did as an RRSP, the difference being the holder cannot contribute further to the fund.

Early Retirement

In the highly competitive nature of our modern business environment, many companies are using downsizing and other cost cutting methods to maintain financial health. The prospect of permanent lay-offs and early retirement looms larger on the mind of more Canadians than it ever has before. There are important options for consideration


If you are in a company pension plan, you have the option of staying in the plan and receiving a pension at retirement age or you can have the funds moved over to a locked-in RRSP. By transferring the funds to a locked-in plan, you have the ability to postpone receiving your retirement funds beyond age 65. Transferring the funds to a locked-in plan also provides greater flexibility for tax and estate-planning purposes. Upon your death, your spouse can roll the entire value of the locked-in plan to his/her own RRSP or locked-in plan. If you plan to find employment elsewhere, or start your own business or for what ever reason, do not need the income just yet, you must put those funds into a LIRA.

Locked-in Retirement Accounts or LIRAs

A LIRA is basically a restricted RRSP where the money will continue to grow free of tax until age 71, when the balance must be used to purchase an annuity or rolled into a Life Income Fund or LIF. Generally, funds cannot be withdrawn from a LIRA as they might from an RRSP.


You need to know that contributions cannot be made to a LIRA because it can only be funded from an employment pension plan. The monies deposited into a LIRA are secure and exempt from seizure in the event of financial difficulties. The capital in a LIRA can be put into various forms of investment instruments. Like an RRSP, conversion to a retirement income product must be done before the end of the year in which the owner turns 71.


Many times, people become upset about the details and restrictions applying to the management of their own money but, it is important to remember these plans are in existence to provide definite security in old age. Restrictions have been designed to make certain the intent is ultimately fulfilled.