Life Income Fund (LIF)

There are two other types of locked-in funds: Life Retirement Income Funds (LRIFs) and LIF/LRIFs

A LIF is like a RRIF but with maximums on the withdrawals

A Life Income Fund (LIF)

  • can receive transfers from
    • LIRAs (Locked-In RRSP)
    • another LIF
    • locked-in pension funds
    • pension funds

Advantages

  • owner controls the income received (within limits)
  • principal and income are tax-sheltered until withdrawn
  • investment choices is similar to RRSPs and LIRAs
  • minimum and maximum withdrawal limits to provide regular income to age 80

Disadvantages

  • minimum age to open: 55 (none for rrifs)
  • must use the remaining balance to buy a life annuity by December 31 of the year in which annuitant turns 80

Withdrawals

  • withdrawals start by December 31 of the year following the opening of the LIF
  • minimum withdrawals
  • maximum withdrawals
    • formula applies Term Certain Annuity to age 90 to the beginning of year find value
      • varies by province and maybe by year
    • prevents cashing out (RRIF can be cashed out in full at any time)
  • withdrawals above the minimum are subject to withholding tax (like RRIF)

Death

  • at death, same options as with RRIF: rollover to spouse‚Äôs RRSP, RRIF or use to buy annuity
Feature LIF RRIF
Minimum age 55 none
Maximum withdrawal yes none
Forced to buy a life annuity yes (by age 80) never

LIF/LRIF

  • minimum withdrawal based on same formula as for RRIF
  • maximum withdrawal based on federal and provincial pension legislation

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