What is a LIRA primarily used for?

A LIRA, or Locked-In Retirement Account, is primarily designed as a retirement savings tool specifically for locked-in pension funds. When an individual leaves a job where they participated in a pension plan, the funds accumulated in that pension plan must be transferred to a LIRA. This transfer is governed by legislation, ensuring that the funds remain protected for retirement purposes.

Unlike other investment vehicles that may allow for access to funds before retirement, a LIRA restricts withdrawals until certain conditions are met, such as reaching retirement age or transferring funds into a retirement income vehicle like a Registered Retirement Income Fund (RRIF). This characteristic is critical for maintaining the objective of securing retirement income.

While a LIRA does allow for tax-sheltered growth, which is a feature associated with various types of retirement accounts, its primary function is distinctly to hold pension funds in a way that preserves the intended use of those funds for retirement. This distinction is what solidifies the answer regarding its main purpose.