100th Post Contest Winner and Lock In RRSP

Congratulations to Dan who's comment was selected as the winner for the 100th post contest (Dan please send me an email with your full name and mailing address so I can send you your prize). To celebrate Dan's win I'm going to cover his suggested topic of the Lock In RRSP.

The obvious place to start with an Lock In RRSP is a definition. A lock in RRSP is also referred to as a LIRA account and comes about when you leave a company with a vested pension. When you leave the company you are offered typically two choices:

1) Take a partial pension age the regular age of your pension plan (often in your 60's) or
2) Take a lump sum transfer to a LIRA account

Now a LIRA account can be either just mutual funds, a self directed account or just about anything an RRSP can be invested into. The trick with a LIRA account is you can't withdrawl the money until the age specified by your plan or your provincial Pension Act (often around 55 at the earliest) or add money to it unless you get another pension lump sum payout that has vested.

So Locked In accounts provide a interesting challenge to your investing. You know you may not going to be adding to the account ever, so you have to pick your choices wisely based on the amount of money you got deposited to your account. Depending on how much you get for a lump sum, ETF might be a great choice since you would have very low fees for a long investment horizon. One last thing to note is if you get a small amount look up your provincial Pension Act, you might be able to un-lock small pension amounts and move it over to a regular RRSP account.

I personally like a Lock In RRSP since I can take my pension money with me after I'm vested with a company and not have to worry about the company making changes to the plan after I'm gone.