LIF and LRIF Guide Canada 2025

Updated March 2025 · 10 min read

A Life Income Fund (LIF) is a registered account that you convert your LIRA into when you're ready to start drawing pension-based retirement income. LIFs have both minimum and maximum annual withdrawal limits — the minimum ensures you draw some income each year, while the maximum prevents you from depleting the fund too quickly (preserving its annuity-like purpose). This guide explains how LIFs work and what you need to know.

What Is a LIF?

A LIF is essentially the income-drawing version of a LIRA. Once you're eligible (typically at age 55 in most provinces), you can convert your LIRA to a LIF and begin making withdrawals. Like an RRSP converted to a RRIF, the LIF holds investments and you draw from it annually. Unlike an RRIF, a LIF has a maximum withdrawal limit in addition to the minimum.

LIF Minimum Withdrawals

LIF minimums follow the same schedule as RRIF minimums, based on your age (or your spouse's age, if lower). The minimum percentage is prescribed in federal and provincial regulations and increases each year as you age. For example:

• Age 65: Approximately 4.00% of January 1 balance
• Age 70: Approximately 5.00%
• Age 75: Approximately 5.82%
• Age 80: Approximately 6.82%

All LIF withdrawals are added to your taxable income in the year received.

LIF Maximum Withdrawals

The maximum LIF withdrawal is calculated based on the LIF balance, your age, and prescribed interest rates. The formula: Maximum = LIF balance × (prescribed rate ÷ (1 − (1 + prescribed rate)^(−(90 − age)))). The prescribed rate is the greater of the 30-year Government of Canada bond rate and a floor rate.

In practical terms, the maximum withdrawal is typically 6–10% of the LIF balance for those in their 60s and 70s. You can withdraw anywhere between the minimum and maximum in a given year.

The One-Time 50% Unlocking Option

In most provinces (Ontario, BC, federal, and others), when you first convert your LIRA to a LIF, you have a one-time option to transfer up to 50% of the LIF balance to an RRSP or RRIF (if under 71). This unlocks those funds permanently — they can then be accessed freely (subject to tax). This option must be exercised shortly after the first LIF conversion and cannot be done again.

This 50% unlocking is widely considered one of the most important LIRA/LIF planning moves available. It converts locked-in funds to flexible RRIF/RRSP funds, giving you much greater control over timing withdrawals and managing taxes.

LRIF: Locked-In Retirement Income Fund

A Locked-In Retirement Income Fund (LRIF) is available in some provinces (Newfoundland, Manitoba historically) as an alternative to a LIF. LRIFs differ from LIFs in their maximum withdrawal calculation — in some LRIFs, you can withdraw up to your annual investment gains plus a set formula, rather than a fixed percentage. LRIFs were available in more provinces previously but have been replaced by LIFs in Ontario and several others. If you're in a province that still offers LRIFs, compare them carefully to LIFs for flexibility.

PRIF: Prescribed Retirement Income Fund (Saskatchewan and Manitoba)

Saskatchewan and Manitoba offer a Prescribed Retirement Income Fund (PRIF) — essentially a RRIF with no maximum withdrawal limit. A PRIF has only minimums (like a regular RRIF), making it the most flexible option for locked-in pension money. It's only available in these two provinces. If you have a Saskatchewan or Manitoba pension, a PRIF is generally considered the most attractive option at retirement due to its flexibility.

Converting to an Annuity

Instead of (or in addition to) a LIF, you can use your LIRA balance to purchase a life annuity from an insurance company. An annuity converts the lump sum into guaranteed monthly income for life. Annuities are attractive for those who want simplicity, certainty, and protection against outliving their savings. Rates depend on your age, gender, interest rates at purchase, and options selected (e.g., indexed, joint life, guarantee period).

Strategic LIF Withdrawals

Because LIF withdrawals are taxable income, timing and amount matter:

• In low-income years, take maximum allowed from LIF to use up lower marginal tax brackets
• Coordinate LIF withdrawals with RRIF withdrawals, CPP, OAS, and any DB pension to minimize tax
• If you have a spouse with lower income, consider pension income splitting — LIF income from a LIF converted after 65 qualifies for pension income splitting
• The 50% one-time unlocking is almost always worth doing to gain flexibility

LIF vs. DB Pension at Retirement

If you have both a LIRA (from a job you left) and a DB pension (from your current job), you'll likely be managing both. Your DB pension provides predictable indexed income; your LIF provides flexible additional income. A common approach is to use DB + CPP + OAS as the "floor" income and draw from LIRA/LIF to supplement or fill gaps in lower years.

Key Takeaways

• LIF has both minimum and maximum withdrawals — you must take at least the minimum and cannot exceed the maximum
• The 50% one-time unlock at LIF conversion is a powerful planning tool — don't overlook it
• Saskatchewan and Manitoba PRIF is the most flexible option for those provinces
• LIF withdrawals are fully taxable income — plan accordingly
• LIRAs must convert to LIF/annuity by December 31 of the year you turn 71