LIRA & LIF Complete Guide

What Is a LIRA?

Locked-In Retirement Account

• Holds money from employer pension plan
• Transferred when leaving job
• Cannot withdraw until retirement
• Similar to RRSP but locked in

How Money Gets Into LIRA

• Transfer from defined benefit pension
• Transfer from defined contribution pension
• Commuted value from DB plan
• Can't contribute new money

What Is a LIF?

Life Income Fund

• Income phase of LIRA
• Similar to RRIF
• Must withdraw minimum each year
• Has maximum withdrawal limit too

LIRA to LIF Conversion

• Must convert by Dec 31 of year turn 71
• Can convert earlier
• No age requirement to convert
• Some provinces allow at 55+

Provincial Variations

Jurisdiction Matters

• LIRA/LIF rules based on original pension jurisdiction
• Federal (PBSA) vs provincial rules
• Where you live now doesn't change it
• Check original pension documents

Common Jurisdictions

• Federal: Banks, telecoms, transport
• Ontario: Most Ontario employers
• Quebec: Quebec employers
• Alberta, BC, etc.: Employers in each province

LIF Withdrawal Limits

Minimum Withdrawal

• Same formula as RRIF
• Based on age and account value
• Must withdraw minimum each year

Maximum Withdrawal

Unlike RRIF, LIF has a cap:

• Varies by jurisdiction
• Often based on CANSIM rate or formula
• Designed to ensure funds last
• Typically 6-8% of value in early 70s

Unlocking Options

Age-Based Unlocking

Some jurisdictions allow unlocking at certain ages:

• Federal: 50% unlock at age 55+
• Alberta: 50% one-time unlock
• Ontario: Small balance unlocking, 25% one-time
• Quebec: Limited unlocking options

Small Balance Unlocking

• If LIRA under certain threshold
• Can unlock entirely
• Varies by province ($22,000-$50,000+)
• Tax applies on withdrawal

Financial Hardship Unlocking

• Low income situations
• Medical expenses
• Rent/mortgage arrears
• Strict criteria apply

Shortened Life Expectancy

• Doctor certification required
• May unlock partially or fully
• Varies by jurisdiction

Non-Residency

• Some jurisdictions allow unlock if leaving Canada
• Often requires 2+ years non-residency
• Federal PBSA allows after 2 years

Tax Treatment

While Growing

• Tax-deferred growth (like RRSP)
• No tax until withdrawal
• Same investment options as RRSP

Withdrawals

• 100% taxable as income
• Withholding tax on amounts over minimum
• Same rates as RRIF
• Added to other income

Pension Credits

• LIF income qualifies for pension income amount (65+)
• Qualifies for pension income splitting (65+)
• Same as RRIF treatment

Other Locked-In Vehicles

LRIF (Locked-In Retirement Income Fund)

• Similar to LIF
• Used in some jurisdictions
• May have different max rules

PRIF (Prescribed Retirement Income Fund)

• Manitoba and Saskatchewan option
• No maximum withdrawal
• More flexibility than LIF

LIF to Life Annuity

• Can use LIF to buy annuity
• Guaranteed income for life
• No more maximums

Planning Strategies

Maximize Unlocking

• Check your jurisdiction's rules
• Apply for any available unlocking
• Transfer unlocked funds to RRSP/RRIF
• Gain flexibility for retirement

Spouse's Age

• Like RRIF, can use spouse's age
• Affects minimum (and sometimes maximum)
• Lower minimums if spouse younger

LIF + RRIF Together

• Withdraw from RRIF beyond needs
• LIF provides base income
• RRIF provides flexibility

Common Questions

Can I transfer LIRA to RRSP?

Generally no, except through unlocking provisions. The money is locked in.

What happens at death?

• To spouse: Transfers to their LIRA/LIF or RRSP
• To others: Paid out, taxed on final return
• Can name beneficiary directly

Can I have multiple LIRAs?

Yes. May have different jurisdiction rules for each if from different employers.

Record Keeping

• Original pension documentation
• Transfer paperwork showing jurisdiction
• Annual statements
• Unlocking applications if made