Personal Finance

Best options for Locked-in Retirement Account or Locked-in Savings Plan

  • Last Updated:
  • Dec 18th, 2017 11:12 am
[OP]
Banned
Jan 20, 2017
584 posts
145 upvotes

Best options for Locked-in Retirement Account or Locked-in Savings Plan

has anyone here got any recommendations for Locked-in Retirement Account or Locked-in Savings Plan accounts. I am wondering if there are any financial institutes that are better than others in terms of rate offerings, ease of administering the account etc.?
Also wanted to know what is your opinion about best possible interest rates, best instruments like GIC, ETFs etc. specifically for LIRA accounts.
19 replies
Sr. Member
Jun 10, 2013
588 posts
256 upvotes
GICs are cash equivalents, no point having those in locked in accounts unless you really hate bonds.
I would have mine go to Questrade, but it isn't for novices (someone without desire, willpower, or interest in managing their money). You can always transfer the LIRA to a bank discount brokerage arm if you'd like. TD probably has the cheapest index funds (eFund series).

Nothing beats the Questrade + ETF combo (maybe interactive brokers/qtrade?). You shouldn't have to pay for someone to administer your LIRA...
Deal Fanatic
Feb 15, 2006
8708 posts
3167 upvotes
Toronto
All banks can handle LIRAs or Locked-in RSPs.

Recommendation on what to do: Do some learning about LIRAs and investing.
Sr. Member
Jan 23, 2009
722 posts
523 upvotes
Ontario
jaguaar wrote: has anyone here got any recommendations for Locked-in Retirement Account or Locked-in Savings Plan accounts. I am wondering if there are any financial institutes that are better than others in terms of rate offerings, ease of administering the account etc.?
Also wanted to know what is your opinion about best possible interest rates, best instruments like GIC, ETFs etc. specifically for LIRA accounts.
ive had mine at Tangerine, Oaken, PCF, CIBC and bns etc they are like rrsp and be careful no separate cover under CDIC for Lira it is combine with your RRSP of course i mean at the same FI. I would start with Simplii now for 3% and wait and see what the interest is going to be bu March good luck
Sr. Member
Jun 10, 2013
588 posts
256 upvotes
agit wrote: ive had mine at Tangerine, Oaken, PCF, CIBC and bns etc they are like rrsp and be careful no separate cover under CDIC for Lira it is combine with your RRSP of course i mean at the same FI. I would start with Simplii now for 3% and wait and see what the interest is going to be bu March good luck
Oh shit, you're right. I totally didn't think about that. CIPF covers the brokers and insures you up to a million. A bank account is insured by CDIC and only covers you 100k per account...Something to consider.

I still think nothing is better than securing a discount brokerage and purchasing ETFs. You won't be seeing LIRA money until you're 55 so it might as well be invested in high performing assets like the US stock index...
[OP]
Banned
Jan 20, 2017
584 posts
145 upvotes
wow. Awesome replies.
Thanks to all of you.
The nugget about cdic insurance limit was eye opener indeed. Something to keep in mind.
I liked hotbotrader's "You shouldn't have to pay for someone to administer your LIRA..." Very true.
So, in principal, LIRA, is nothing more than regular funds and can be invested in multiple places with the caveat that it can not be withdrawn before retirement (or is it 55 years age?).
I am wondering if it will be better to let it earn 1% for a year and wait for stock markets to drop 2500 points.....its gonna happen in a year or two. And then pounce on the opportunity.
Or do you have better game plan?
Sr. Member
Jun 10, 2013
588 posts
256 upvotes
jaguaar wrote: wow. Awesome replies.
Thanks to all of you.
The nugget about cdic insurance limit was eye opener indeed. Something to keep in mind.
I liked hotbotrader's "You shouldn't have to pay for someone to administer your LIRA..." Very true.
So, in principal, LIRA, is nothing more than regular funds and can be invested in multiple places with the caveat that it can not be withdrawn before retirement (or is it 55 years age?).
I am wondering if it will be better to let it earn 1% for a year and wait for stock markets to drop 2500 points.....its gonna happen in a year or two. And then pounce on the opportunity.
Or do you have better game plan?
I could have been retired by now if I didn't wait for the markets to drop or waiting for the best time...Just sayin' (I'm early 30s).

Best practice says time in the market is superior to timing the market but I don't fully believe that. I normally would recommend the couch potato portfolio to others because it's best practice. Also a lot of the boglehead convention is predicated on an ever increasing stock market (which has held true for 2 centuries in the USA), but it didn't hold true in Japan (where they're not back to 1980s levels). NASDAQ only made it's highs back after 17 years.

If you go with Questrade (free ETF purchase) or any other broker: http://canadiancouchpotato.com/wp-conte ... s-2016.pdf
If you go with TD eFunds: http://canadiancouchpotato.com/wp-conte ... s-2016.pdf

What I do myself (I do not recommend this)...I have 20% REITs (VNQ+VNQI), 20% Gold (MNT), 20% Intermediate Bonds (ZAG), 20% World Stocks (XAW), 20% Small Cap Value (VBR)
I plan to hold this structure until such a crash happens then I flip to 100% US stocks (VTI)...I wouldn't recommend doing this. I have psychological hangups that I can't let go, but this portfolio has served me well (downside limited to 20%) by providing gains in uncertain times. Couch potato advocates will say that you can't predict the markets which is true. But I've wasted so many years trying to time and lost out that I'd be super pissed if I went all in and suddenly the market corrects wiping out half my life savings. Someone young that is starting out won't have this problem. I've spent a lot of time digging through data and backtesting but the past doesn't predict future...If there's money to be risked, you'll get paid more for taking on that risk in equities (and small cap values even further).

55 may be way long off for you. In that case you can increase your risk from a measily 1%. If you get the ZAG bond bond from BMO, you will get a 3% return in coupon and whatever cap gains you make on the ETF increase (or decrease).
Sr. Member
Jun 10, 2013
588 posts
256 upvotes
That's truly why you diversify your portfolio though - dampens damage from crashes (if you have 50 bonds 50 stocks and stocks tank 40%, you only take 20% damage on your portfolio + any gains from the bonds going up). 50% bonds is pretty damn high though IMO. Though with interest rates this low, if we head into another recession/depression, maybe bonds won't behave in the same way and provide returns while stocks are down. We won't know. What we do know is that there really isn't anywhere else to park your money. If you go for dinky bank savings rates, there is a guarantee that inflation will kill you, and your LIRA that once may have bought a house will barely be able to buy a car. Stocks are probably the only way to protect against this (and theoretically gold but it doesn't produce anything, at least stocks give a dividend (interest)). Your typical stock fund will pay you 2% in dividends. You can get more if you buy a specific dividend ETF like XEI in Canada (4.35%).

I was reading a book called 'The Truth about your Future' by Ric Edelman. He paints a scenario that if you took 15k in today's money, and only made bank interest from 1983, you'd only have 504 bucks of purchasing power today. After all that inflation, you'd need 44k to equal that 15k.
Sr. Member
Jun 10, 2013
588 posts
256 upvotes
Image

If you look at this table, you'll see that in 5-year holding periods you can make nothing or even lose money. One year holding periods can have disastrous losses. If you hold for a 10 year period, it seems to do a tad better, in a 20 year period, it's virtually unheard of to have lost money. But you have to remember past doesn't predict future. Most of the gains in the past 10-20 years only came from about 15-20 days of gains, staying in the market longer helps you lock these in...But start point does matter...I think the truth is, no one really knows, and your risk and return thresholds have to be determined by you and executed by you only...I'm a bad person to listen to though, others can chime in. But I can tell you, sitting in cash is a loser's game in the long run as it is government policy to have inflation (and totally within their control via the Bank of Canada - which is theoretically a politically independent entity).
Sr. Member
Jun 10, 2013
588 posts
256 upvotes
Image

Here's the chart, the majority of the gains in the past 20 years occurred in 60 days.
[OP]
Banned
Jan 20, 2017
584 posts
145 upvotes
Keeping the money @ 2 or 3% is a losing proposition IMO. Are there any GICs or safe instruments that guarantee 5% or more?
Sr. Member
Jun 10, 2013
588 posts
256 upvotes
Nope...risk free rate is 1% now =/, anything more requires risk. Unless you sacrifice liquidity for a measly sum (GIC). Depends on your time to 55, if it's long then stocks make more sense, at these prices who knows...Asset allocation is tough. Ideally a crash happen and you buy in full tilt on stocks but it may/may not happen. This is why we get paid to take on this risk. REITs are 3-4%, even long-term 20+ year bonds are at 3%'ish. Bond funds have risk too, they can go down in principle to rising interest rates. Short term bonds are 2%, GIC can range between 1-3.something, eqbank is 2.3% (annualized rate) everyday, intermediate bonds between 2-3%, stock dividends between 2-4% but you get stock price appreciation. I'm in the same bind as you, that portfolio I have above was the best way I can accommodate the uncertainty - basically buy everything and make money on the rebalancing of the portfolio.
Deal Addict
Mar 1, 2016
1092 posts
397 upvotes
toronto
don't view your LIRA separately from the rest of your savings. If you want to keep your fixed income percentage component in there, that's fine (probably not the most efficient), but make sure you are aligned with the rest of your savings. For longest time my LIRA represented my % of foreign equity, so this is what i had in there, but that was just for ease
[OP]
Banned
Jan 20, 2017
584 posts
145 upvotes
Hobotrader wrote: Nope...risk free rate is 1% now =/, anything more requires risk. Unless you sacrifice liquidity for a measly sum (GIC). Depends on your time to 55, if it's long then stocks make more sense, at these prices who knows...Asset allocation is tough. Ideally a crash happen and you buy in full tilt on stocks but it may/may not happen. This is why we get paid to take on this risk. REITs are 3-4%, even long-term 20+ year bonds are at 3%'ish. Bond funds have risk too, they can go down in principle to rising interest rates. Short term bonds are 2%, GIC can range between 1-3.something, eqbank is 2.3% (annualized rate) everyday, intermediate bonds between 2-3%, stock dividends between 2-4% but you get stock price appreciation. I'm in the same bind as you, that portfolio I have above was the best way I can accommodate the uncertainty - basically buy everything and make money on the rebalancing of the portfolio.
Thanks for the excellent post, you have crammed lot of practical info in it. I have been following stocks for a decade now and know it for sure that markets go up and down for sure, at least 3/4 times a year. 2017 has baffled me but there is no way I am going in at these prices.

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