What is a LIF

A Life Income Fund is a Registered Retirement Income Fund (RRIF) that was purchased with locked-in funds. If you worked for a company with an employer pension plan, terminated employment or plan membership before normal retirement age and were eligible to receive your pension funds, those funds would have been “locked-in” under provincial pension legislation and not available to you in cash until the early or normal retirement age specified in that province’s pension legislation. The funds were transferred to a Locked-In Retirement Account (LIRA). Once you reach normal retirement age, a LIRA can be transferred to a LIF.

You can convert the LIRA to a LIF or a life annuity when you reach normal retirement age. You must convert the LIRA to a LIF and begin to draw income by the end of the calendar year you turn 71.

  • If you live in British Columbia, Alberta, Manitoba, Ontario, Quebec, New Brunswick, Nova Scotia or Newfoundland & Labrador, you can purchase a LIF.

  • If you live in Saskatchewan or Manitoba, you have the option of purchasing a Prescribed Registered Retirement Income Fund (PRIF). Accountholders whose funds are locked-in under Saskatchewan legislation can transfer the full amount of their locked-in funds to a PRIF, and if the funds are locked-in under Manitoba legislation, an annuitant who is at least 55 years old (the provincial early retirement rate) can unlock up to 50% of the LIF funds and transfer it to a prescribed RRIF. The advantage of this is there is no maximum withdrawal amount on a PRIF. The minimum withdrawal rules stay the same.

  • If you live in Newfoundland and Labrador, you must convert your LIF to a life annuity by the end of the year you turn age 80.

LIF Withdrawals

LIF Minimum

A LIF follows RRIF minimum withdrawal rules. The funds withdrawn from a LIF are considered income and you will have to pay tax on them at your marginal tax rate. You will receive a T4-RIF from the financial institution holding your LIF account that will show the amount of the withdrawal.

You cannot use your spouse’s age to determine LIF minimum payments.

What is the Marginal Tax Rate

Your marginal tax rate is the combined federal and provincial taxes you pay on all sources of income at tax time. Your financial institution will provide a T4-RIF showing the amount of the withdrawal, and any tax withheld, if applicable. You must declare this amount on your T1 General Income Tax Return (the forms you complete to file your income tax) in the calendar year you withdrew it.

Remember: LIF withdrawal amounts are added to your gross earned income. Depending on the size of the withdrawal, it could push you into a higher tax bracket.

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          Maria Marlin Retired Govt Officer, ON, Canada

          Very helpful fully explaining the different plans. Cash value is accessed via policy loans, which accrue interest and reduce cash value our valuable items.

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          Maria Marlin Retired Govt Officer, ON, Canada

          Very helpful fully explaining the different plans. Cash value is accessed via policy loans, which accrue interest and reduce cash value our valuable items.