Why locking in doesn’t make sense


Piggy Bank in Chains with Padlock

We are in the process of reviewing our assets in preparation for retirement in the next year or two. One thing that sticks out like a sore thumb is a locked-in retirement account (LIRA) with $60,000 that was originally opened to receive the commuted value of my husband’s IBM pension when he left the company many years ago.

We would like to transfer that money into his main RRSP account in order to avoid paying two annual account fees and to make it easier to understand and balance investments over both accounts.

He probably won’t withdraw money from the account until age 71. And even if he did, it represents only about 3% of our investments so spending all or part of this amount would not leave us destitute at retirement!

Since he is over 55, he can set up a life income fund and transfer the balance in his LIRA to the LIF. At that time, he can take 50% of the balance in cash (and pay taxes) or transfer the amount to his unlocked RRSP leaving about $30,000 in the LIRA until age 71 when these funds also have to be moved into the LIF.

But if he does this, instead of streamlining his accounts, he will be left with both a LIRA, a LIF in addition to his main RRSP!

If the balance left in the LIRA met the “small account” criteria for unlocking (in 2014 $21,000 or less) the remaining balance could also be transferred to his unlocked RRSP. But because it exceeds $21,000 he is out of luck.

Furthermore, he will have to take at least the minimum withdrawals prescribed by CRA annually from the $30,000 plus accrued investment income sitting in the LIF from the year after it is set up instead of tax sheltering this amount until age 71 if it remained in the LRIF.

Fortunately we do not qualify for unlocking based on financial hardship , but even if we did it strikes me as extremely patronizing that Ontario legislation would require us to submit forms to our financial institution revealing income information and be limited to one withdrawal per year based on actual rent owing or medical expenses.

The locking-in and unlocking rules vary from province to province. However, for many years Saskatchewan has allowed funds in locked-in retirement accounts to be fully unlocked once they are transferred to a prescribed RRIF. And I have yet to read anything that suggests provincial welfare rolls are up as a result.

It’s time that Ontario and other provinces followed Saskatchewan’s lead so all Canadians can be trusted to make the right decisions about how and when to spend their retirement savings.




  1. I agree these rules are in the stone age.

    I think at age 55, full unlocking should be granted. The sooner you can move monies around, the better.

    Thanks for sharing,

    • Thanks for commenting.

  2. Hi Sheryl,
    Great article.
    A quick question on your comment, “he will be left with both a LIRA, a LIF in addition to his main RRSP”. I was under the impression that since your husband is of retirement age he can move the entire amount from the LIRA –>> LIF. Then as you mentioned, you move 50% to your RRSP.

    Therefore (or at least I had thought) you’d be left with only two accounts: a LIF and a RRSP. (The LIRA would be dissolved).

    • Thanks for your note. My assumption is that he won’t want to transfer the balance in the LIRA to his LIF until age 71 or he will be required to begin withdrawing money in the next year.

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