Last week we explain locked-in retirement account, or LIRAs. You had some more questions around the withdrawal of funds from a LIRA which has led to today’s post on LIFs, or Life Income Fund.
If you have a LIRA and you’ve reached retirement and need your money, one of the options for drawing it as income is to convert your LIRA to a LIF. Converting a LIRA to a LIF is similar to converting an RRSP to a RRIF.
A LIF is designed to create a regular income stream during retirement. When you convert to a LIF there is a minimum amount of income that must come out at a time. Where a LIF differs from a RRIF is there is also a maximum amount you can withdraw at a time. This keeps you from withdrawing your money too quickly and using up your retirement funds too early.
When you withdraw money though a LIF it is taxed as income. However, any financial growth accumulated while money resides in a LIF is tax deferred.