Q – I am 64 and will retire next year. I have a locked-in pension from my old employer. Do I need to wait until 72 to cash out my mutual funds? Please help! – Samantha K., Niagara Falls, Ontario
A – When an employer makes contributions to a registered plan for you, this type of plan is referred to as a Locked-In Retirement Account (LIRA), or Locked-In Registered Retirement Savings Plan. Generally, funds are not available for withdrawal (hence, “locked in”) until you retire. There are a few circumstances where some funds may be withdrawn early, for example, if you need the money for medical expenses, a place to live, renovations to your residence due to an illness or disability, shortened life expectancy, or if you become a non resident.
When you wish to start withdrawing money from a LIRA, you will purchase a Locked-In Retirement Income Fund (LRIF) with the LIRA assets. This will allow you to begin withdrawing the funds as income. The earliest age that an individual can purchase an LRIF is generally 55, but could be earlier depending upon the age at which you may retire under the terms of the pension plan from which the money originated.
A certain amount must be paid out of an LRIF each year, except in the initial year of the LRIF. You may choose not to be paid any money in the first year but must begin receiving payments from the LRIF before December 31 of the following year.
I recommend you contact your pension administrator and inquire directly about your account. They will be able to tell you when you can start to withdraw money. Once you have this information and you have purchased an LRIF, you will instruct your advisor to sell some of your mutual funds to make money available for payment. – R.T.