The life income fund (LIF) cannot be withdrawn in a lump sum; rather, owners must use the fund in a manner that supports retirement income for their lifetime. Each year’s Income Tax Act specifies the minimum and maximum withdrawal amounts for LIF owners, which takes into consideration the LIF fund balance and the owner’s annuity factor.
LIF owners are not required to purchase a life annuity, buy may choose to do so at any age. A LIF owner may also choose to transfer funds to another LIF, a locked-in retirement income fund (LRIF) or in certain cases to a locked-in retirement account (LIRA). The financial institution from which the LIF is issued must provide an annual statement to the LIF owner. Based on the annual statement, the LIF owner must specify at the beginning of each fiscal year the amount of income he or she would like to withdraw. This must be within a defined range to ensure the account holds enough funds to provide lifetime income for the LIF owner.