- A Life Income Fund (LIF) is a retirement income option for your locked-in money from a pension plan. You purchase a LIF by transferring money from a Locked-in Retirement Savings Plan (LRSP) or a Locked-in Retirement Account (LIRA).
- An LIF is essentially an RRIF with both a minimum and maximum withdrawal amount.
- You don't pay tax on the amount transferred from your locked-in pension, and the investments continue to grow tax sheltered until they are withdrawn as income.
- You must convert your LIF to an annuity at age 80.
- An LIF provides more flexibility than a life annuity. You can choose between the minimum and maximum withdrawal amounts how much to withdraw each year and you can time your income for when you need it. If you want to continue tax-sheltering your retirement income, you can make the minimum withdrawal and let your money continue to grow on a tax-deferred basis.
The 2008 Budget included the foloowing three provisions to Life Income Funds, which apply to federally-regulated LIFs:
Individuals 55 or over with LIF holdings of up to $22,450 will be able to wind up their accounts with the option to convert to a tax-deferred savings vehicle.
Individuals 55 or older will be entitled to a one-time conversion of up to 50% of LIF holdings into a tax-deferred savings vehicle with no maximum withdrawl limits.
All individuals facing financial hardship (low income, high disability or medical costs) will be able to unlock up to $22,450.
The threshold of $22,450 will increase with the average industrial wage.
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