What is a defining feature of a Locked-In Retirement Account (LIRA)?

A Locked-In Retirement Account (LIRA) is specifically designed to hold pension funds when an individual transfers them from a registered pension plan upon leaving an employer. A defining feature of a LIRA is that it restricts access to the funds until the individual reaches a certain age, which is typically set at 55 years old. This restriction is put in place to ensure the long-term growth and security of retirement savings.

The rules surrounding LIRAs are meant to align with pension legislation, which promotes the idea of preserving retirement income until individuals are at least nearing retirement age. Consequently, once the age requirement is met, the account holder can start making withdrawals under the applicable regulations.

Additionally, LIRAs allow for tax-deferred growth until the funds are withdrawn, and they do not allow contributions from sources outside of the transferred pension amounts. By understanding this, it's clear that the restriction on withdrawals until a certain age is fundamental to the structure and purpose of a LIRA, ensuring that funds remain earmarked for retirement.