LIRA vs RRSP: What Should You Consider for Retirement?

LIRA vs RRSP: What Should You Consider for Retirement?

When deciding on a retirement plan, the debate typically settles around LIRA vs. RRSP, the two most popular savings options in Canada. However, if you’re new to full-time work or retirement planning, you might not know about either option.

Despite their equal popularity, there are several stark differences between these two retirement plans, and we’ll highlight all of them in this guide.

Table of Contents

What Is a LIRA?

Before comparing LIRA vs. RRSP, it’s essential first to understand each retirement account, starting with LIRA.

A Locked-In Retirement Account (LIRA) is a specialized savings account you can open after leaving your current employer’s pension plan. 

A LIRA holds your pension money and doesn’t let you withdraw from it until you’ve officially retired. Additionally, each LIRA has a maximum on how much you can take out at a time. Fortunately, money in a LIRA is tax-free until you begin making withdrawals. 

You cannot make additional deposits into a LIRA; the only money that enters the account is what you receive from your company pension plan. While the contribution and withdrawal restrictions make LIRAs more limited than the pension funds we’ll examine below, some people prefer the hassle-free, set-and-forget convenience that comes with a LIRA.

However, because you cannot add outside funds into a LIRA, they fit best with retirees who don’t need extra financial assistance outside their pension plan.

When You Can Use LIRA Funds Pre-Retirement?

What Is a RRSP?

A Registered Retirement Savings Plan (RRSP) has more flexibility than a LIRA and comes with some of the same benefits.

Like a LIRA, you won’t pay taxes on your RRSP investments until you officially retire. Additionally, because the Canadian government registers RRSPs, they offer even more tax benefits that LIRAs cannot provide.

Another similarity between a LIRA and RRSP is that they both have contribution limits. However, while LIRAs limit contributions to only what’s in your pension plan, RRSPs permit outside additions up to 18% of your total income. RRSPs also have an overall cap of $29,210.

RRSPs are also more flexible than LIRAs beyond just the contribution options. For example, while you can only use the funds in your LIRA for retirement, you can use your RRSP to purchase property or pay for a relative’s education.

You can also take money out of your RRSP prior to retirement, unlike a LIRA, which locks your funds until you’re out of the workforce. However, you must pay a withholding tax for any withdrawals before retirement ranging from 10% to 30%.

Differences Between LIRA and RRSP

Now that you know the basics of the two most popular Canadian retirement plans, we can examine the factors setting LIRA vs. RRSP apart, starting with their three most critical differences.

  • Intention: Both RRSP and LIRA are accounts that help you live comfortably through retirement. However, while RRSPs permit flexibility in what you spend your savings on, LIRAs are solely for your essential retirement services. For example, the RRSP lets you apply funds to federal programs like the Home Buyers’ Plan and the Lifelong Learning Plan, but those services are inaccessible with LIRA funds.
  • Longevity: RRSP and LIRAs have expiration dates, but LIRAs offer slightly more longevity. You can keep your existing RRSP until you’re 71, but you must convert it to a Registered Retirement Income Fund (RRIF) after. On the other hand, you can keep your LIRA account until you’re 72, and you’ll have multiple conversion options, which we’ll explore later.
  • Geographical Differences: The federal government regulates RRSPs by the income tax act, so the specific rules are the same regardless of where the beneficiary lives. On the other hand, LIRAs have provisional regulations, so their terms change within each province.

Benefits of a LIRA

Though LIRAs might not appear to have many surface-level benefits when comparing LIRA vs. RRSP, they provide stronger financial control and stability than any retirement package.

Full Pension Control

Easy to Transfer as Inheritance

You Can Change to a LIF or LRIF

Benefits of a RRSP

When comparing LIRA vs. RRSP, you’ll find that both plans have advantages and disadvantages. However, RRSPs might be more suitable if you prefer financial flexibility and tax benefits over stability and minimal fees.

Tax Benefits

Asset Protection

Easy to Live on After Retirement


Group Enroll: Find Group Retirement Savings Plans Today

No matter where you fall on the LIRA vs. RRSP debate, Group Enroll will find you a quality retirement savings plan you can bring to your business that satisfies everyone.

We work with providers across Canada to find retirement options that fit your needs and provide competitive proposals. When you complete a consultation with our team, we’ll send you a comprehensive list of the best offers available within three business days.

Complete our online form to get a quote today, or email us your questions at Our office is at 10 Great Gulf Drive, Unit 5, Vaughan, ON, L4K 5W1.