What is a Lifetime Savings Account?

In 2003, George Bush proposed a new tax-free savings and investment account called a “Lifetime Savings Account,” or LSA, as they are often referred to. A lifetime savings account gives its owner no income limits, high contribution amounts and a considerable amount of freedom to withdraw, spend and invest money.

Lifetime Savings Account Rules

If you open a lifetime savings account, you can contribute up to $7,500 to it every fiscal year. What you put in is not tax-deductible, but whatever returns you earn from your LSA are tax-free. That’s a pretty good deal.

In addition, any withdrawals you make would likewise be tax-free and penalty-free. Compare that to a 401(k) or an IRA, both of which have heavy penalties for early, pre-retirement withdrawals.

Advantages of a Lifetime Savings Account

That’s one of the biggest advantages to an LSA – with no age restrictions, you can use your LSA to save for anything you want, whether it’s college tuition for your kids, your own retirement or that fancy fur coat you’ve always wanted. The point is the LSA can be for whatever you want, no matter how frugal or frivolous.

In addition, people who open a lifetime savings account would be able to rollover money from different kinds of accounts into it. For example, if you have a Coverdell Education Savings Account, you could roll the money in it into your LSA if you wanted to. In future years, the maximum amount of money you could contribute to your lifetime savings account would rise to keep pace with inflation.

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In order to find out more about lifetime savings accounts, be sure to sit down with your financial advisor and go over any and all questions you might have. You may find the lifetime savings account to be a very interesting and compelling investment vehicle.

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GOBankingRates Staff

These articles are written by the in-house GOBankingRates team.

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What is a Lifetime Savings Account?
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