Ontario LIRA Locking in Agreement: What You Need to Know
If you are a resident of Ontario who is approaching retirement, you may want to consider a LIRA or Locked-in Retirement Account. As the name suggests, a LIRA is a type of registered retirement savings plan that is “locked-in” – meaning that the funds are not accessible until the account holder reaches retirement age. This makes LIRAs an excellent option for those who want to protect their retirement savings from the temptation to dip into them early.
However, recent changes to Ontario`s LIRA regulations have made things a bit more complicated. In 2020, the Ontario government announced changes to the Pension Benefits Act that would allow LIRA account holders to enter into agreements with their financial institutions to unlock up to 50% of their funds. This new option is known as the “Ontario LIRA Locking in Agreement.”
So, what do you need to know about this new agreement? Here are some essential details:
1. Who is eligible for the Ontario LIRA Locking in Agreement?
To be eligible for the Ontario LIRA Locking in Agreement, you must be a resident of Ontario and have a LIRA account that was created in Ontario. Additionally, your LIRA must meet specific criteria set out by the Ontario government.
2. What are the criteria for unlocking funds under the Ontario LIRA Locking in Agreement?
To qualify for the unlocking of funds under the Ontario LIRA Locking in Agreement, you must meet one of the following criteria:
– You have reached the age of 55
– You have a shortened life expectancy
– You have a mental or physical disability that prevents you from working
Under the new regulations, you can unlock up to 50% of your LIRA`s value if you meet one of these criteria.
3. How does the Ontario LIRA Locking in Agreement work?
To unlock funds under the Ontario LIRA Locking in Agreement, you must enter into an agreement with your financial institution. This agreement must outline the amount of money you wish to unlock, as well as how and when you will receive the funds. Your financial institution will also need to disclose any fees or penalties associated with the unlocking of funds.
4. What are the risks of unlocking funds under the Ontario LIRA Locking in Agreement?
While the Ontario LIRA Locking in Agreement may sound like an attractive option, there are some risks to consider. Unlocking funds from your LIRA early will reduce the amount of savings you have available for retirement. Additionally, if you withdraw funds from your LIRA before you reach retirement age, you may be subject to taxes and penalties.
5. Should you consider the Ontario LIRA Locking in Agreement?
Whether or not you should consider the Ontario LIRA Locking in Agreement depends on your individual circumstances. If you are in a financial bind and need access to your retirement savings, unlocking funds from your LIRA may be a good option. However, if you are still working and have other sources of income, it may be best to leave your LIRA funds locked in until retirement.
In conclusion, the Ontario LIRA Locking in Agreement offers an additional option for those who have LIRA accounts in Ontario. While there are risks associated with unlocking funds from your LIRA early, it may be a good option for those in need. As always, it is essential to speak to a financial advisor before making any significant financial decisions.