You worked, contributed, accrued... and then one day, the time comes when you need to start withdrawing your locked-in savings, that is, the amounts that were blocked because they were saved for retirement. When it comes time to
withdraw your money, this is where the life income fund (LIF) comes into play.
What is a LIF?
When you stop accruing amounts in a
locked-in retirement account (LIRA) or a supplemental pension plan, you will need to transfer those amounts into a withdrawal tool, such as a life income fund. A LIF allows you to transform your savings into retirement income. You will receive payments in the amount and at the frequency you have determined, in accordance with applicable rules.
How does it work?
Each year, you must withdraw a minimum amount, but you cannot exceed the maximum established.
Why such rules? Simply to avoid seeing your savings disappear too quickly. A LIF does not allow you to withdraw the amounts of your choice freely. Instead, it is designed to provide you with a stable income for as long as possible, which contributes to your financial security throughout your retirement.
What can the amounts in a LIF be used for?
For nothing other than retirement... or almost!
A LIF does not allow you to use the money in a locked-in retirement account to benefit from, for example, the home buyer's plan (HBP) to buy a home or the lifelong learning plan (LLP) to return to school.
In certain cases, it is possible to use the amounts in a LIF to finance a buy-back. However, the pension plan to which you contribute must allow you to do so.
Be vigilant!
Certain persons claim they can help you withdraw all the money from your LIRA or LIF without having to pay any taxes. But beware: that is impossible.
These methods are fraudulent and can result in significant financial losses. A LIF is regulated, monitored, and protected. Be wary of offers that seem to break the rules.
In short
A life income fund is the mechanism that allows you to receive a regular income from the locked-in savings you have accrued throughout your career. It is structured, protected, and designed to provide you with a stable income throughout your retirement.
It helps transform what you have saved into a well-deserved income.
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