Locked-In Retirement Funds (LIFs) are a type of retirement savings account that is offered by financial institutions in Canada. They are similar to Registered Retirement Savings Plans (RRSPs), but have some key differences.
Locked-In Retirement Funds are subject to provincial legislation, which means that there are some differences from province to province. For example, in some provinces you can only have one LIF, while in others you can have multiple LIFs.
The most important difference between LIFs and RRSPs is that you cannot withdraw money from a LIF until you reach a certain age, typically 50 or 55. This age is known as the "preservation age". Once you reach the preservation age, you can start withdrawing money from your LIF, but there are still some restrictions.
The amount of money that you can withdraw from your LIF each year is limited. The amount is calculated using a formula that takes into account your age and the value of your LIF.
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What is a Locked-In Retirement Fund (LIF)?
A LIF, or Locked-In Retirement Fund, is a result of participating in a pension plan in Canada and then transferring your pension value to a LIRA, and then convert to a LIF when you want to start drawing an income during your retirement years.
Should I contribute to a defined contribution (DC) pension plan?
Many employers in Canada offer their employees a defined benefit (DB) pension plan, where the size of their pension benefit is determined by a formula that takes into account their years of service and their salary or wage.