If you’ve ever left your place of employment in the past for whatever reason, it is possible that you opted to take out your pension in the form of a Locked-in Retirement Account, or LIRA.
A LIRA functions in a similar manner to an RRSP – it is intended to shelter investments that will help to fund your lifestyle in retirement. Similar to an RRSP, a LIRA account can be kept intact until the end of the year when you turn 71 years of age.
At this point in time, you have the option to purchase a life annuity or convert your account into a Life Income Fund (LIF). A LIRA becomes a LIF in the same way that an RRSP converts to an RRIF.
A handy trick to know is that you can unlock up to 50% of your account value once the conversion happens.
While an RRIF has a minimum amount that has to be withdrawn from the account each year, a LIF also has a maximum amount that can be withdrawn. This makes LIF accounts more inflexible than RRIF accounts.
As the minimums and maximums vary each year, make sure to know the percentage values as you age.
As the LIF is an account type, it can be held at a lot of different financial institutions in Canada. We will cover a list of the best dealers for life income funds in Canada below.
How Do LIF Payments Work?
LIF payments are amounts that have to come out of your account each year. This amount has to fall between both a minimum and a maximum, as outlined earlier.
Since assets in your LIF account are tax-deferred, they have been growing over time tax-free. Once you make a withdrawal from your LIF account, it is considered income in the year that it is taken out.
LIRA and LIF accounts are invaluable because they allow your assets to compound over a long period of time without paying taxes until your money is withdrawn. This effect is more pronounced the longer that you invest.
Can I Cash Out My Life Income Fund?
Once a LIF is established, you will have to follow the minimum and maximum percentage guidelines for withdrawing money from it.
These are in place to make sure that your LIF is used for the purpose of providing you with income over the course of your retirement.
Before converting your LIRA to a LIF, you have to option to purchase a life annuity. You can generally unlock up to 50% of a LIRA once it converts to a LIF, but there are specific criteria.
Life Income Funds in Canada: 14 Best Dealers
1. RBC
RBC is one of Canada’s largest banks and part of the big five banks. You are able to open or transfer your LIF account to RBC across several of its divisions.
RBC Direct Investing is RBC’s self-directed platform and supports LIF accounts. LIF accounts are also supported at RBC Dominion Securities, RBC Royal Bank, and RBC PH&N Investment Services.
2. TD
TD is another very large bank in Canada with diverse investment dealer platforms. You are able to open or transfer your LIF account to TD across several of its divisions.
TD Direct Investing is TD’s self-directed platform and supports LIF accounts. LIF accounts are also supported at TD Canada Trust and TD Wealth Private Investment Advice.
3. BMO
BMO is another one of the big five banks in Canada. LIF accounts can be transferred to BMO across several of its subsidiaries.
BMO InvestorLine is BMO’s self-directed platform and supports LIF accounts. LIF accounts are also supported at BMO Bank and BMO Nesbitt Burns.
4. Scotiabank
Scotiabank is another name on the list of the big five banks in Canada. Scotiabank accepts LIF accounts across all of its divisions.
Scotia iTrade is Scotiabank’s self-directed platform and supports LIF accounts. LIF accounts are also supported through Scotiabank’s retail channel and through Scotia Wealth Management.
5. CIBC
CIBC is the last of the big five banks in Canada. They also accept LIF accounts across all of their subsidiaries.
CIBC Investor’s Edge is CIBC’s self-directed platform and supports LIF accounts. LIF accounts are also supported through CIBC’s retail channel and CIBC Wood Gundy.
6. National Bank
National Bank is the next largest bank in Canada, frequently referred to as part of the big six (when expanding beyond the big five).
National Bank accepts LIF accounts across all channels, including its retail channel in-branch and National Bank Direct Brokerage. National Bank Financial advisors can also manage LIF accounts.
7. Questrade
Questrade is a discount brokerage in Canada that is independent of the major five banks.
Positioning itself as a low-cost competitor to the banks’ discount brokerages, Questrade accepts LIF accounts.
8. Wealthsimple
Wealthsimple is another independent discount brokerage in Canada that positions itself in a similar manner to Questrade.
Wealthsimple allows you to open or transfer your LIF accounts to their platform. Note that this is only allowed for Wealthsimple Invest (the robo-advisor platform), not Wealthsimple Trade.
9. Raymond James
Raymond James is an independent, full-service brokerage, which means that you will have to work with an advisor to have your assets managed.
Raymond James advisors have no problems managing LIF accounts.
10. Canaccord Genuity
Canaccord Genuity is another independent, full-service brokerage, allowing you to work with an advisor to have your assets managed.
Canaccord Genuity advisors can transfer or open LIF accounts for their clients.
11. Assante
Next on the list is Assante, which is another full-service brokerage in Canada.
Working with an Assante advisor will allow him or her to open or transfer over your LIF account.
12. iA Private Wealth
iA Private Wealth is an independent, full-service brokerage, meaning that you will have to work with an advisor to have your assets managed.
iA Private Wealth advisors can open or transfer LIF accounts for their clients.
13. Manulife Securities
Manulife Securities is another independent, full-service brokerage, allowing you to work with an advisor to have your assets managed.
Manulife Securities advisors can transfer or open LIF accounts for their clients.
14. Edward Jones
Last but not least on our list is Edward Jones. Edward Jones is another full-service brokerage in Canada and is unique because its advisors usually have independent offices.
Edward Jones accepts both new LIF accounts as well as transfers of existing LIF accounts.
Conclusion
As a tax-deferred account, the LIF account allows you to continue growing your money tax-free. Once your money is withdrawn from the account, these payments are considered income and taxed at your marginal tax rate.
A LIRA converts into a LIF, similar to how an RRSP converts into an RRIF.
If you have switched multiple employers over the course of your life, you may have multiple LIRA or LIF accounts. Fortunately, most discount and full-service brokerages in Canada are well-equipped to hold or manage your LIF assets.
Keep in mind that your LIF account is usually not your only retirement income source. Be mindful of your sources of retirement income, in order to make your tax bill manageable.
