Life Income Fund (LIF)

A Life Income Fund (LIF) is a registered account designed to provide retirement income from locked-in pension money. If you have a LIRA (Locked-In Retirement Account), the LIF is the vehicle you convert it into when you’re ready to start drawing income. Think of the relationship like an RRSP and a RRIF: a LIRA is where the money grows, and a LIF is where you start taking it out.

How it works

A LIF has both a minimum and a maximum annual withdrawal. The minimum is the same formula used for RRIFs, based on your age and account balance. The maximum is set by government rules (federal or provincial, depending on where the pension originated) and is designed to prevent you from draining the account too quickly.

These maximums exist because LIF money originally came from a pension plan, and the intent is for it to last through your retirement. You can’t withdraw the entire balance in one shot the way you could with a regular RRSP or RRIF.

You must convert a LIRA to a LIF by December 31 of the year you turn 71, just like the RRSP-to-RRIF deadline. Some provinces allow conversion earlier if you want to start taking income sooner.

Why it matters

If you’ve ever left a job that had a defined-benefit or defined-contribution pension, there’s a good chance your pension money was transferred into a LIRA. Understanding how LIFs work helps you plan how that money will eventually fund your retirement.

The withdrawal limits can be frustrating if you need more flexibility, but some provinces offer unlocking provisions that let you transfer a portion of your LIF into a regular RRIF or withdraw it as a lump sum under certain circumstances (financial hardship, shortened life expectancy, small balance, or reaching a certain age). Rules vary by province, so it’s worth checking what applies to your situation. For more on retirement income accounts, see our RRIF guide.

A concrete example

Say you’re 65 and your LIF has a balance of $200,000. Your minimum withdrawal for the year might be around $8,000 (4%), while the maximum could be roughly $13,200 (6.6%) depending on your province. You can withdraw any amount in that range, but you can’t take out $50,000 in a lump sum the way you could from a RRIF.