LIF vs LIRA vs RRIF, and LIRA vs RRSP: How the Retirement Accounts Differ

This page compares the three accounts that hold retirement savings once they start turning into income: the RRIF, the LIRA and the LIF, and how a LIRA differs from an ordinary RRSP. The short version is that the difference comes down to where the money came from and whether there is a cap on what you can take out. Each account has its own detailed guide: the LIRA guide, the Life Income Fund guide and the RRIF withdrawal rules. They are grouped under turning savings into income in the RRSP and RRIF guide directory. For how these fit a wider retirement plan, see retirement income strategies in Canada.

Quick comparison

The table below groups these accounts into three parallel tracks rather than three independent choices, because you don’t pick between a LIRA and a LIF the way you’d pick between, say, a TFSA and an RRSP. A LIRA converts into a LIF (or an annuity) when you’re ready to draw income, so they’re two phases of the same money, not two competing options. The same is true of RRSP and RRIF. The third track is staying inside your original employer pension and simply drawing lifetime payments, without ever taking a commuted-value transfer into a LIRA at all.

All three tracks converge at the same destination, taxable retirement income, but the LIF track carries an annual withdrawal cap that the RRIF track does not, and the Pension track leaves withdrawal amounts to the plan rather than to you.

RRIF (Registered Retirement Income Fund)

A RRIF is the income-phase version of an RRSP. When you convert your RRSP to a RRIF, which must happen by December 31 of the year you turn 71, the account stops accepting contributions and starts requiring annual minimum withdrawals. The minimum percentage increases with age and is set by federal legislation; it applies regardless of market conditions, which means you must withdraw even in years when your portfolio has declined in value.

The defining feature of a RRIF that distinguishes it from a LIF is the absence of a maximum withdrawal. You can take out as much as you want in any given year, which gives you full control over your tax planning. In a year with unusually low income, for example, before CPP and OAS begin, you can draw a larger RRIF amount to fill lower tax brackets. In a high-income year, you draw only the minimum. This flexibility is exactly what the LIF lacks.

Key features

• Minimum annual withdrawal: a percentage of the January 1 balance that rises with age; the rates for every age are in the RRIF minimum withdrawal table
• No maximum withdrawal: you can take out as much as you want in any year (all taxable)
• Investment flexibility: you can hold the same investments as in your RRSP
• Withholding tax: tax is withheld at source on amounts above the minimum; nothing is withheld on the minimum itself

The RRIF calculator models a withdrawal schedule.

LIRA (Locked-In Retirement Account)

A LIRA holds pension money that has been transferred out of an employer pension plan, for example when you leave a job and, where your plan allows it, take the commuted value of your pension instead of leaving it in the plan. The defining characteristic of a LIRA is that you cannot access the funds directly. There are no regular withdrawals and no RRSP-style access in an emergency: money comes out only by converting to a LIF or annuity, or through narrow unlocking provisions such as financial hardship. The money is held in trust for your future retirement income.

Despite the restrictions, a LIRA behaves like an RRSP in every investment sense. You can hold ETFs, GICs, mutual funds, bonds, and individual stocks, and the balance grows entirely tax-deferred. The locked-in nature that feels like a limitation during your working years becomes an asset during market downturns: you cannot panic-sell the way many RRSP holders do, and the long runway to age 55 allows compound growth to work without interruption.

Key features

• Locked in: No withdrawals except under narrow unlocking provisions
• Funded by transfer: Holds money transferred from a pension plan; it is not used for regular RRSP-style contributions
• Investment flexibility: Same range as an RRSP; you manage the investments
• Must convert by age 71: Transfer to a LIF or purchase an annuity by December 31 of the year you turn 71

When you might have a LIRA

• You left a job that had a defined benefit or defined contribution pension
• Your former employer’s pension plan was wound up
• You and your spouse divided pension assets in a separation or divorce

LIRA vs RRSP

A LIRA is a locked-in RRSP: it invests the same way, but because it holds pension money, the rules on putting money in and taking it out are different.

LIF (Life Income Fund)

A LIF is the income-phase version of a LIRA. You convert your LIRA to a LIF when you are ready to start drawing retirement income from the former pension assets, or at the mandatory deadline of age 71. A LIF works like a RRIF in many respects: it holds the same types of investments, requires a minimum annual withdrawal, and taxes all withdrawals as income in the year received. The critical difference is the maximum annual withdrawal cap, which places an upper limit on how much you can take out in any given year.

The maximum exists for the same reason the LIRA exists: the original pension was intended to provide income for a lifetime, not to be cashed out. Provincial pension legislation sets the maximum formula, and it is recalculated each January based on your account balance and prevailing interest rates. If your financial circumstances change and you need more income than the LIF maximum allows, your options are limited to the unlocking provisions that apply to your specific jurisdiction.

Key features

• Minimum annual withdrawal: Same percentages as a RRIF; mandatory each year
• Maximum annual withdrawal: Capped annually under provincial formula; cannot exceed this amount
• Provincial jurisdiction: LIF rules depend on which province’s pension legislation governs your original pension
• Investment flexibility: Same range as a RRIF; you manage the investments
• Pension income credit eligible: At age 65+, LIF income qualifies for the federal pension income tax credit and pension income splitting with a spouse

LIF maximum withdrawal

The maximum is set by the pension law that governs the original plan (federal or provincial), recalculated every January, and your institution tells you the dollar range each year. Some jurisdictions use their own formula and a few have no maximum for certain accounts; the percentage tables for each are in the LIF withdrawal rules.

Choosing between LIF and annuity

When converting a LIRA, you must choose between a LIF and a life annuity. This is not a trivial decision: once you start receiving an annuity, the insurer is unlikely to let you change it, and the LIF option leaves you managing investments and living within annual withdrawal limits.

A LIF makes sense if you are comfortable managing investments, have other reliable guaranteed income (CPP, OAS, or a defined benefit pension), and want to preserve a capital balance for your estate or for unexpected future expenses. The LIF also preserves optionality: you can always purchase an annuity later with part of the LIF balance once your health and income needs are clearer, but an annuity is unlikely to be changeable once it has started.

A life annuity makes more sense if you lack other guaranteed income sources, are concerned about outliving your assets, or strongly prefer predictability over flexibility. Annuity rates improve with age, so some retirees benefit from running a LIF through their 60s and converting a portion of the balance to an annuity in their late 70s, when the lifetime payout rate is significantly higher.

Unlocking LIRA funds

Locked-in money can sometimes be released early, for example for a small balance, shortened life expectancy, financial hardship, non-residency, or a one-time partial transfer when converting to a LIF in some jurisdictions. Which options exist depends on the jurisdiction governing your pension; the LIRA withdrawal rules set them out by province.

Unlocking is also the only way to move LIRA money into an RRSP. In Ontario, for example, a LIRA can otherwise be transferred only to a pension plan, another LIRA, a LIF or a life annuity. The one-time transfer is one such route in some jurisdictions: up to 50% can go to an RRSP or RRIF under federal rules (from a restricted LIF), and to a prescribed RRIF in Manitoba.

Which account do you have?

Ask where the money came from. If you moved your own RRSP into an income-paying account, it is a RRIF. If you left a job with a pension and took the commuted value into a locked-in account, it is a LIRA until you convert it, and a LIF after. Your statement names the account type. Many retirees hold both a RRIF and a LIF; they are never combined, and each has its own minimum (and, for the LIF, maximum) every year.

Bottom line

• RRSP → RRIF: Your personal retirement savings. Flexible: no maximum withdrawal. Full control over timing and amounts.
• LIRA → LIF: Your locked-in pension money. Annual maximum withdrawal applies: you cannot access the full balance at will.
• A LIRA must be converted to a LIF or life annuity, and an RRSP must mature (into a RRIF, an annuity or a taxable withdrawal), by December 31 of the year you turn 71.
• The key practical difference is that LIF funds are capped on the upside: you cannot draw more than the maximum set by your plan’s jurisdiction in any year, unless that jurisdiction sets none or the funds are unlocked.
• At age 65+, both RRIF and LIF income qualifies for the pension income tax credit and pension income splitting with a spouse.

Use our retirement calculator to plan how RRIF, LIF, CPP, and OAS income combine to fund your retirement.

Related Resources

• What to do when you turn 71
• LIRA Guide Canada
• LIRA Withdrawal Rules
• RRIF Minimum Withdrawal Guide
• RRIF Calculator
• RRSP to RRIF Conversion Guide
• Retirement Income Strategies Canada