Author Topic: LIRA investment types and recommendations  (Read 967 times)

Lews Therin

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LIRA investment types and recommendations
« on: April 26, 2018, 06:22:19 AM »
Howdy all, I'm looking out to two years when I'll have to transfer my pension into a LIRA (I'm doing return of contributions). Is there anything I should do in order to avoid things like tax drag, since I'd prefer to go with 1-2 ETFs and just leave it there for 30+ years. Any recommendations? Since it's such a long time frame, I don't want to put bonds in, or concentrate on canadian (VCN) since I'll have that in my taxable portfolio, so I'm looking for the best way to have all-word-ex Canada, but without the tax drag of options like XAW (if possible)

Any recommendations, things I'm missing for using a LIRA?

Prairie Stash

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Re: LIRA investment types and recommendations
« Reply #1 on: April 26, 2018, 09:13:18 AM »
PTF - my spouse will be getting forms next week about her pension, it will be a LIRA, that account will be in the range of $25k-40 (I forget off hand)

I assume that you treat it the same as the RRSP investments, now you have me wondering. If I understand correctly the money is locked until  59.5 years, so I was going to just put it into stocks as well and forget about it for the next few decades.

bluebelle

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Re: LIRA investment types and recommendations
« Reply #2 on: April 26, 2018, 09:25:11 AM »
LIRAs (Locked in Retirement Account) is very similar to a RRSP with the following differences
1) You can not withdraw money until you're 55 (I think there's some 'hardship' clause that lets you get at it sooner)
2) There are annual maximums you can withdraw from a LIF (locked income fund - like a RRIF)  (annual minimums are the same as RRIF)
3) you can't merge LIRAs with RRSPs
4) there are federal LIRAs (from a bank for example) and provincial LIRAs (non federally regulate companies) and these can't be merged either

Treat it the way you're treat an RRSP with respect to investment strategy.

RichMoose

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Re: LIRA investment types and recommendations
« Reply #3 on: April 26, 2018, 10:19:39 AM »
Howdy all, I'm looking out to two years when I'll have to transfer my pension into a LIRA (I'm doing return of contributions). Is there anything I should do in order to avoid things like tax drag, since I'd prefer to go with 1-2 ETFs and just leave it there for 30+ years. Any recommendations? Since it's such a long time frame, I don't want to put bonds in, or concentrate on canadian (VCN) since I'll have that in my taxable portfolio, so I'm looking for the best way to have all-word-ex Canada, but without the tax drag of options like XAW (if possible)

Any recommendations, things I'm missing for using a LIRA?
If you're in a federal pension plan, it will go into a Locked-in RRSP. The best I could suggest is doing a DLR/DLR.U swap and investing in VT or a blend of ITOT and IXUS. This will at least eliminate the U.S. portion of withholding taxes.

Lews Therin

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Re: LIRA investment types and recommendations
« Reply #4 on: April 26, 2018, 10:36:10 AM »
L-RRSP : it will be in the range of 120-140k
(So above the min withdrawal amount)

@rich moose (your . breaks the @ your name search) could you go a bit into detail about what you mean with the DLR/DLR.U Swap?

RichMoose

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Re: LIRA investment types and recommendations
« Reply #5 on: April 26, 2018, 11:25:46 AM »
L-RRSP : it will be in the range of 120-140k
(So above the min withdrawal amount)

@rich moose (your . breaks the @ your name search) could you go a bit into detail about what you mean with the DLR/DLR.U Swap?
Changing your account to US currency using Norberts Gambit and buying US listed ETFs.

Lews Therin

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Re: LIRA investment types and recommendations
« Reply #6 on: April 26, 2018, 12:35:43 PM »
@RichMoose IT WORKS!

Does L-RRSP not automatically have a tax arrangement for US withholding like RRSP?

RichMoose

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Re: LIRA investment types and recommendations
« Reply #7 on: April 26, 2018, 11:32:10 PM »
@RichMoose IT WORKS!

Does L-RRSP not automatically have a tax arrangement for US withholding like RRSP?
A lot of people are confused about this. If you are using an RRSP then withholding taxes will not be deducted on distributions from US sources ONLY if you buy US-listed ETFs. If you buy Canadian-listed ETFs in your RRSP, you will pay withholding taxes and they are not recoverable.

L-RRSP are considered the same as RRSPs for this purpose under the tax treaty.

Lews Therin

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Re: LIRA investment types and recommendations
« Reply #8 on: April 27, 2018, 11:13:11 AM »
VT sounds good. But no withholding on that one right? (if held in the account)

It's pretty much the same as holding ITOT and IXUS at a 51/47 % right? (with a 1% cash for some reason)

RichMoose

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Re: LIRA investment types and recommendations
« Reply #9 on: April 27, 2018, 11:44:28 PM »
VT sounds good. But no withholding on that one right? (if held in the account)

It's pretty much the same as holding ITOT and IXUS at a 51/47 % right? (with a 1% cash for some reason)
Yes VT is similar to a roughly even split of the other two. Most ETFs hold a bit of cash at any given time due to money coming in and going out.

With these you would not pay US withholding taxes. International ones would still apply to a lesser extent. These are not avoidable unless you forgo international stocks altogether.