Life income fund (LIF)
Use your pension or LIRA savings for retirement income
A LIF can offer flexible income for Canadians starting their next chapter after work.
If there’s money left in your plan when you die, it goes to your beneficiaries or estate, subject to appliable legislation (less any applicable taxes).
You only pay income tax on the money you withdraw each year
Flexible income with growth potential
You control investments within your plan, so you can hold a variety with potential for growth.
What is a life income fund (LIF)?
If you’ve reached retirement, and you have a pension you would like to receive income from, you can convert it to a LIF.
Or, if you were part of a workplace pension plan, and left before retirement, your savings may have been placed in a Locked-in retirement account (LIRA). Once you retire, that LIRA can convert to a life income fund (LIF).
Unlike a Registered retirement savings plan this money can be used only for retirement income.
How does a LIF work?
- When you retire, convert money in a pension plan or a LIRA to a LIF or purchase an annuity
- You can work with an advisor to choose your investments, which will continue to grow tax-advantaged
- Withdraw an amount between the pre-determined minimum and maximum each year
- In some provinces, you must turn remaining LIF capital into an annuity when you turn 80
Are there any pros or cons I should think about with a LIF?
- Control over income and investments
- Growth potential
- Death benefit
- No requirement to buy an annuity
- One-time unlocking up to 50% in some provinces
- Requires some financial decision-making
- Legislated minimum and maximum withdrawal amounts
- Potential for market volatility
- Potential to run out of money, particularly if you unlock funds
- Your spouse or common-law partner’s consent may be required
The information provided is based on current laws, regulations and other rules applicable to Canadian residents. It is accurate to the best of our knowledge as of the date of publication. Rules and their interpretation may change, affecting the accuracy of the information. The information provided is general in nature, and should not be relied upon as a substitute for advice in any specific situation. For specific situations, advice should be obtained from the appropriate legal, accounting, tax or other professional advisors.