Lesson Locked-in accounts

LIF Life Income Fund

Learn more about LIFs (Life Income Funds).

Before we dive into LIF accounts, you may want to first learn about Locked-In Retirement Accounts (LIRA).

When you leave a company where you have an employer-sponsored pension, whether you left or you have been laid off, you have to transfer your pension entitlement into a LIRA or LRSP (Locked-in retirement savings plan). LIRAs/LRSPs, give you the flexibility to manage your portfolio during your working years.

With some exceptions, the money in your LIRA/LRSP cannot be withdrawn until you reach the age of retirement which is set by your regulator. Once you reach the age of retirement as prescribed by your federal or provincial regulator, you can begin withdrawing funds.

But before doing so, you have to convert your LIRA/LRSP into a LIF (Life Income Fund) or LRIF (Locked-in Retirement income fund) depending on your provincial regulator.

While there are rules governing the minimum and maximum amounts you’re allowed to withdraw every year, a LIF/LRIF/RLIF keeps you in control of how your money is invested, it keeps your assets tax-sheltered until you withdraw them, and provide pension income during the account holder’s retirement years.

You can diversify and build a portfolio by investing in one or more of the RSP-eligible products below:

  • Stocks (both Canadian and foreign stocks)
  • ETFs
  • Mutual funds
  • Bonds (including government, corporate, strip, and savings bonds)
  • Gold and silver bars
  • GICs
  • Treasury bills (T-bills)
  • Cash
  • And more

LIF accounts are also available as Questwealth Portfolios.

Here are some key things you should know about LIF accounts:

  • You cannot continue contributing to your LIF, but by managing your portfolio, your LIF could grow
  • You must convert your LIRA/Locked-in RRSP into a LIF before December 31st of the year when you turn 71
  • LIFs cannot be withdrawn all at once. Account holders must follow the annual income tax act which dictates the minimum and maximum withdrawal amounts based on your age. Tax is paid each year and only on the amount withdrawn
  • Since income is taxed only when it's taken out of the plan, the tax deferral you enjoyed with your LIRA or locked-in RRSP continues in your LIF account
  • You can designated beneficiaries in your Questrade LIF account

Note: The information in this blog is for educational purposes only and should not be used or construed as financial or investment advice by any individual. Information obtained from third parties is believed to be reliable, but no representations or warranty, expressed or implied, is made by Questrade, Inc., its affiliates or any other person to its accuracy.

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