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Hey folks. Not sure if this question is better posted here or another section, so mods feel free to move if adequate.

So, my wife received a cash payment from her pension (we took the commuted value) and it was transferred to a LIRA account, as required. Now, we used those funds to purchase an ETF that pays monthly dividends, and the question is :

Can I withdraw those dividends (or for example transfer them to my margin account)?

Im just a bit unclear about this since it is a LIRA account, so what Im not sure is if the original money (let's say for illustration purposes the pension was worth 100k) is locked in and subject to whatever restrictions apply to a LIRA account, or if the dividends generated within it are also subject to those limitations.

Imagine I transferred 100k pension to the LIRA account, and I understand we cannot take cash out (unless certain very specific situations apply), but if those 100k generate 500.00 in dividends per month - can I withdraw those 500.00? If so, how will they be treated for taxation purposes?

Any help is appreciated.
 

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Hey folks. Not sure if this question is better posted here or another section, so mods feel free to move if adequate.

So, my wife received a cash payment from her pension (we took the commuted value) and it was transferred to a LIRA account, as required. Now, we used those funds to purchase an ETF that pays monthly dividends, and the question is :

Can I withdraw those dividends (or for example transfer them to my margin account)?

Im just a bit unclear about this since it is a LIRA account, so what Im not sure is if the original money (let's say for illustration purposes the pension was worth 100k) is locked in and subject to whatever restrictions apply to a LIRA account, or if the dividends generated within it are also subject to those limitations.

Imagine I transferred 100k pension to the LIRA account, and I understand we cannot take cash out (unless certain very specific situations apply), but if those 100k generate 500.00 in dividends per month - can I withdraw those 500.00? If so, how will they be treated for taxation purposes?

Any help is appreciated.
... trying here to answer your 3 questions above:

1. Dividends generated within the LIRA account are subject to same LIRA restrictions.

2. You can't just withdraw the $500 dividends from the LIRA account - you must convert the LIRA first to a LIF. There're minimum and maximum withdrawals restrictions there. See link below.

3. All monies coming out from the LIF are considered fully taxable income. Here's a starter link to explanation of a LIF and its treatment of income: TaxTips.ca - LIF and LRIF minimum and maximum withdrawals
 

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I would encourage anyone with a LIRA to familiarise themselves with the specific type/jurisdiction of the LIRA as well as the types of paperwork the managing FI requires to unlock or access it. There are a few ways to break into a LIRA early, and you should take the time to understand what applies in your instance and how to go about filing your intent to do so. Some examples are:
  • low or no income
  • inability to pay rent or mortgage
  • age
  • small value of the LIRA
Being unemployed for a year, or needing a downpayment for a house, irrespective of your actual financial means, might be enough to break into it and convert it to a normal registered holding.

 

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^ (y) despite the OP mentioned about dividends withdrawals from the LIRA for a margin account (for example) ... :D
 
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