The differences between LIFs and RRIFs - Small businessess from 1 to 80 employees outsource your payroll management to us and let us worry about your payroll processing.
RSS Follow Become a Fan

Delivered by FeedBurner

Recent Posts

Tax changes to expect when you’re expecting
2016 Tax Tips for 2015 Filing Year
From Proprietorship to Corporation - When is the Best Time to Incorporate?
Tax Specialists Brief your Clients About CRA Fraud And E-Mail Scams
Bank of Canada cuts rates again

Most Popular Posts

Help your teenager build credit responsibly
Being an Executor of an Estate
Student Line of Credit
Principal Residence Exemption


aliko nutrition store- isotonix
aliko payroll services
canada revenue news and videos
canadian news
Cross border Tax
Disability awareness and Benefits for disabled
estate planning
Home Car Insurance
Income Splitting Strategies in Retirement
kids and money -set your children up for financial success
life insurance
on line safety tips
online safety tips
Real Estate - Investments / Retirement
Retirement planning
Save your money
small business planning
Tax Information for Students
tax news
tax planning
Tech news


January 2016
July 2015
May 2015
April 2015
February 2015
December 2014
November 2014
September 2014
August 2014
July 2014
June 2014
May 2014
April 2014
March 2014
February 2014
January 2014
December 2013
November 2013
October 2013
September 2013
August 2013
July 2013
June 2013

powered by


The differences between LIFs and RRIFs

The differences between LIFs and RRIFs
The differences between LIFs and RRIFs
Written by Jim Yih
Recently I wrote about the differences between a LIRA and a RRSP.  In this article I want to follow up and discuss the difference between LIFs and RRIFs.
What is a RRIF?
A Registered Retirement Income Fund (RRIF) is the most common income option for the RRSP.  If a RRSP is a tax sheltered bucket of money, the RRIF is simply a tax sheltered bucket of money with a hole in it.
While the RRSP is designed for accumulation of funds for retirement, the RRIF is really designed to create regular systematic income in retirement.  Some people suggest that you can withdraw money from a RRSP whenever you want so why would you need the RRIF?  The RRIF is really diesigned for regular income in retirement.  If you wanted monthly income, you may not want to call up the bank or your financial advisor everytime you needed money. Instead, you would automate that income via a RRIF.
What are some of the differences between a RRSP and a RRIF?  You can make contributions to a RRSP but not to a RRIF.  Because the RRIF is designed for income, there is a minimum income amount that must be withdrawn every year from a RRIF
Related article:  RRIF Minimum income rules
What is a LIF?
LIF stands for LIfe Income Fund and the key word is income.  A LIF is very similar to RRIF.  In fact, the LIF is to a LIRA what the RRIF is to the RRSP.  A LIF is used to convert LIRA money to income just like a RRIF is used to convert RRSPs to income.
A LIF is very important for those people that are retiring with a Defined Contribution Pension Plan
What are the differences between RRIFs and a LIFs?
Just like the LIRA has similarities to the RRSP, the LIF has a lot of similarities to the RRIF.
·         A Life Income Fund is designed to create regular income.  If we used the bucket analogy, the LIF and the RRIF are just buckets with holes in them.
·         In both cases, there is a minimum income that must come out of then plan.
·         Income is only taxed when you receive income.
·         In both the RRIF and the LIF, you can invest in many different types of investments like GICs, bonds, mutual funds, stocks, etc.
The big difference between the LIF and a RRIF is that the LIF not only has a minimum income but also a maximum income that prevents you from spending the money too quickly.
Unlocking rules
Before you convert a LIRA to a LIF for income, you should research the pension unlocking rules in your province or territory.  When it comes to pensions, every province has its own set of rules so the pension unlocking rules can vary across Canada.
Because the LIFs have a maximum income, it can be very restrictive to access funds.  As a result unlocking rules can be very favourable because they create greater flexibility.
Because of the restrictive nature of pension funds, I usually suggest people draw from LIFs before RRIFs and to draw the maximum out of the LIFs (not the minimum).  The theory is to use up as much restrictive money as possible before using less restrictive money.  This is not always the case as personal planning is important instead of using general rules of thumb.

0 Comments to The differences between LIFs and RRIFs :

Comments RSS

Add a Comment

Your Name:
Email Address: (Required)
Make your text bigger, bold, italic and more with HTML tags. We'll show you how.
Post Comment