If you have a Life Income Fund (LIF), you know it comes with rules—specifically, limits on how much you can withdraw each year.
While these limits are designed to ensure your retirement savings last, they can feel restrictive when you need more flexibility.
Good news:
By transferring part of your LIF into a Registered Retirement Income Fund (RRIF) or a Registered Retirement Savings Plan (RRSP), you may be able to achieve more flexibility with your savings while keeping the tax advantages intact.
Here’s how the strategy works:
Each year, you can transfer funds from your LIF to an RRIF or RRSP within the allowable withdrawal limits.
This transfer is tax-deferred, meaning you don’t pay taxes until you withdraw the funds later.
Example: If your LIF rules state a minimum withdrawal of $200 and a maximum of $250, you can transfer up to $50 (the difference between the minimum and maximum) into an RRIF or RRSP.
This keeps the transferred amount growing tax-deferred while giving you greater control over your money.
Three Key Benefits
✅ Flexibility for Future Needs
Funds transferred to an RRIF or RRSP are accessible when needed, though taxes apply upon withdrawal. This gives you the freedom to adjust your withdrawals to suit your circumstances.
✅ Tax Advantages
You only pay taxes on the minimum amount withdrawn from your LIF. The transferred amount remains tax-deferred until you withdraw it from your RRIF or RRSP.
✅ Preserving RRSP Contribution Room
These transfers don’t reduce your available RRSP contribution room, meaning you retain the ability to save even more for retirement.
Important Considerations
Some provincial rules may affect how you leverage this strategy. Consult your wealth advisor for guidance tailored to your circumstances.
Tax Reporting Note:
If you transfer funds from your LIF to a RRIF or RRSP, there’s an additional step required for tax reporting.
You or your accountant will need to fill out the relevant section on your tax return to claim offsetting deductions:
- Line 232 for RRIF transfers.
- Line 208 for RRSP transfers.
Consult your accountant or tax professional to ensure this step is completed correctly.
Getting Started:
To make the most of this strategy, your wealth advisor can:
- Calculate your LIF’s minimum and maximum withdrawal limits.
- Help you transfer the appropriate amount to your RRIF or RRSP.
- Ensure compliance with provincial regulations.
Repeat Annually for Maximum Flexibility
This isn’t a one-time move—you can use this strategy each year to gradually transfer funds from your LIF, giving you more control over your retirement savings without losing tax advantages.
Let’s Talk About Your Plan
If you’d like to explore how this strategy could work for you, get in touch today and we’ll help you make more of your retirement savings.
This information has been prepared by Andrew Nguyen CFA, CFP® who is a Portfolio Manager and Certified Financial Planner for iA Private Wealth Inc. Opinions expressed in this article are those of Andrew Nguyen and do not necessarily reflect those of iA Private Wealth Inc. iA Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Canadian Investment Regulatory Organization. iA Private Wealth is a trademark and business name under which iA Private Wealth Inc. operates.
