Pensions! RRSP's, LIF's, LIRA's, Annuity's, etc.

[kevman]

So I'm looking for a little retirement saving advice. Let me first start by saying that I'm WAY too young to be thinking about it... I know theres no such thing as too young but...

Anyways, my current employer offers what sounds like a pretty good DCPP where they will match up to 9% of my investment. This being tax sheltered leads me to believe that an approx. investment of 6% per pay cheque (after tax) will turn into a full 18% of my salary. This sounds great but this money will be locked in to the plan while I remain an employee at which point I have the option to transfer it to a LIF, LIRA, etc.

Now here’s where I'm looking for some advice and help... Can someone explain to me the pro's and con's of a LIF/LIRA. Maybe it's the way I was brought up but I have a hard time having money in an account that I don't have control over. Being young, ambitious and very entrepreneurially I don't plan on working until I'm 65 just to withdraw a limited income from a large sump of money that I've earned that the government won't let me touch.

The other problem is I want to save for a house and I won't be able to withdraw this money for that purchase. So yes retirement savings are important but to me so is owning my own property.

An automatic “9% raise” is so hard to turn down…

Pretty much I'm looking for some knowledge about locked in retirement plans and how they work...

[jtfrogger]

If your employer is giving you free money, take it. Yes, it is locked in, but you do get to use it once you turn 50.

Here is a quick article I found that might answer some of your questions.

[czure32]

just a couple of quick things.
first depending on the amount in the RSP if/when you leave your current employer, it may be possible that the funds can be transferrable to a regular RSP instead of into a LIRA, but that only works on small amounts (usually under 10k)

Also with a LIRA, when its converted into a LIF/RIF you do also have the option of a 50% unlocking in the province of alberta, but this is somehting you wont be able to take advantage of until you reach age 50 and you will need to pay withholding tax on the withdrawn funds (potentially as high as 30%) if they are withdrawn as income

There are also small amount commutation limits available as well, but again those are all not an option until you reach a certain age

it doesnt answer your primary question as to the pros and cons of LIRA's but it is some additional information. Overall though with the employer matched contributions, it'd be hard to justify not trying to max out that option

you can feel free to PM me if you want some more details or have other questions

[MoneyGuy]

[quote=kevman;1402483]Now here’s where I'm looking for some advice and help... Can someone explain to me the pro's and con's of a LIF/LIRA. Maybe it's the way I was brought up but I have a hard time having money in an account that I don't have control over. Being young, ambitious and very entrepreneurially I don't plan on working until I'm 65 just to withdraw a limited income from a large sump of money that I've earned that the government won't let me touch.

The other problem is I want to save for a house and I won't be able to withdraw this money for that purchase. So yes retirement savings are important but to me so is owning my own property.[quote]

You don't state your age but if you think you're too young to be concerned with retirement savings, why are you concerned about LIF/LIRA rules. That's so far into the future, and the rules will likely change before then anyway. If you absolutely need to know now, I'd take the LIRA over the LIF. Don't worry about understanding the two types of plans, as you can bet they'll be different by the time you get there.

Take the money, without a doubt. Save for the house by other means.

[Slava]

Not much to say that hasn't been said here already...but as another financial advisor on the board here let me say for the record that you should be taking the money.

The difference between a LIRA and a LIF is that the LIF is a LIRA that you have begun withdrawing from. In Alberta this means that you are a minimum of 50 years of age, and there are both minimums and maximums for this. You really don't have a choice here between a LIRA and LIF unless you are over 50, or can qualify for financial hardship (going to be next to impossible given that you have a decent job by the sounds of things and no money in the LIRA to try to qualify for at this point...)