- A LIRA holds pension money from a former employer. The funds are locked-in, but still invested and growing tax-deferred.
- You convert your LIRA to a LIF when you're ready to draw income. By age 71, conversion is mandatory.
- LIF withdrawals have both a floor and a ceiling. The minimum and maximum are recalculated each year based on your age and account balance.
If you have ever left a job with a registered pension plan, you likely have a Locked in Retirement Account (LIRA). For many Canadians approaching retirement, these accounts are a significant part of their financial picture.
As retirement approaches, the focus shifts from growing your LIRA to accessing it. That means converting it to a Life Income Fund (LIF), which comes with its own rules around how much you can take out each year. This article covers the mechanics of the LIRA/LIF retirement account, so you know what to expect.
Understanding LIRAs and LIFs
Before getting into the withdrawal mechanics, it helps to understand what these accounts are and how they relate to the RRSP and RRIF you're likely already familiar with.
From LIRA to LIF
A LIRA holds the commuted value of a former employer's defined-benefit or defined-contribution pension plan. The funds are "locked in" because they originated as pension money — legislation requires they eventually be converted to a retirement income stream, not withdrawn as a lump sum. While locked in, the assets remain invested and grow tax-deferred, much like an RRSP.
A LIRA is a holding account designed for your pension money. When you leave an employer before retirement, you have the option to transfer the commuted value of your pension out of the company plan. Because those funds were originally intended to provide a lifetime retirement income, legislation requires them to stay locked-in.
Once you reach the minimum eligible age under pension legislation, you can convert your LIRA into a Life Income Fund (LIF) and begin drawing income. The remaining funds stay invested, but your annual withdrawals become subject to both a minimum and a maximum. In most Canadian jurisdictions, any remaining LIRA funds must be converted into a LIF or annuity by December 31 of the year you turn 71, similar to a RRIF.
So what happens to your locked-in funds if you pass away? The balance transfers to your surviving spouse or common-law partner, or to your named beneficiaries if you have no spouse.
LIRA/LIFs vs. RRSP/RRIFs
During your working years, a LIRA and an RRSP look similar: both shelter your investments from annual tax. However, an RRSP allow you to add new cash annually based on contribution room, while LIRA accept no new contributions.
RRIFs and LIRAs also look similar when you start drawing income. Both LIFs and RRIFs require you to withdraw a minimum amount each year. However, while you have no caps on how much you can withdraw from a RRIF (you can empty the account all at once if you wish), LIFs also enforce maximum withdrawals.
The Mechanics of LIF Withdrawals
A LIF is the income-drawing stage of locked-in pension money. Unlike a RRIF — which lets you withdraw any amount above a required minimum — a LIF imposes both a minimum and a maximum withdrawal each year. The maximum is designed to prevent you from depleting the account too quickly, with the intent of providing income for life. Rates are set annually by your province or federally, depending on where you earned the pension.
Each year, your financial institution calculates two numbers based on your age and the account balance on January 1.
1. The Minimum Withdrawal
Like a RRIF, the federal government requires you to withdraw a minimum percentage of your LIF starting the year after you open it. This amount is taxable income.
2. The Maximum Withdrawal
The maximum is what distinguishes a LIF from a RRIF. For federal plans, it is calculated using factors set by the Office of the Superintendent of Financial Institutions (OSFI), with the intent that the account can sustain income payments to at least age 90.
Most LIRAs are governed by the province where you worked when you earned the pension. Federally regulated pensions (common at banks, airlines, and telecom companies) have the lowest LIF maximums, meaning tighter income restrictions than most provincial plans. Most provincial plans, including Ontario, BC, and Alberta, allow higher withdrawals.
LIF Withdrawal Limits by Jurisdiction (2025)
To give you a sense of the income window you have, here are the 2025 rates for key retirement ages (based on your age as of December 31 of the prior year). The minimum is universal; the maximum depends on where you earned your pension.
| Age | Min | Federal | MB / NS | ON / BC / AB* |
|---|---|---|---|---|
| 55 | 2.86% | 5.10% | 6.40% | 6.51% |
| 60 | 3.33% | 5.42% | 6.70% | 6.85% |
| 65 | 4.00% | 5.91% | 7.20% | 7.38% |
| 70 | 5.00% | 6.73% | 7.90% | 8.22% |
| 71 | 5.28% | 6.96% | 8.10% | 8.45% |
| 75 | 5.82% | 8.27% | 9.10% | 9.71% |
* Also applies to NL, NB, and SK. PEI follows federal rates. Full table: RBC 2025.
The income window is fairly narrow in your early 60s, particularly for federally-regulated pension holders.
LIF Strategy in Practice
Because a LIF enforces a tight band on drawings, the right approach isn't simply to maximize or minimize your withdrawals. It depends on your full income picture. The two scenarios below show how two different situations can call for opposite strategies.
Case Study
The Early-Retirement Bridge (Age 55–64)
Mark steps away from his career at 55 with savings split across an RRSP, a TFSA, and a federal LIF. He plans to defer Canadian Pension Plan (CPP) and Old Age Security (OAS) to age 70 to capture the deferral bonuses of 42% and 36% respectively.
That decision creates a cash-flow gap between 55 and 65. Many retirees instinctively draw equally from all accounts or drain the RRSP first. A more tax-efficient approach is to take the LIF maximum from the start and use it as an income bridge. Doing so achieves two things:
- Reduces the restrictive account. This approach systematically reduces the LIF while Mark is still in a lower tax bracket, leaving his RRSP and TFSA capital untouched to grow.
- Funds the CPP/OAS deferral. The maximum withdrawals cover living expenses during the gap years, making it easier to delay government pensions and lock in a higher, permanently indexed income floor from age 70.
When CPP and OAS kick in, the smaller LIF balance also means lower mandatory minimums later in life, which matters when income from multiple sources starts stacking up.
Case Study
The Pension Preservationist (Age 65+)
Carol is already 65 and receives steady income from a defined-benefit pension, CPP, and OAS. Those sources cover her core expenses and place her near the top of her current tax bracket. She also holds a LIF from an earlier employer.
Here, the goal reverses: keep LIF withdrawals as low as possible. Taking more than the minimum adds unnecessary taxable income, and at a certain level it can trigger the OAS recovery tax (often called the clawback), which for 2026 begins eroding benefits once net income exceeds $95,323. The strategy has two priorities:
- Take only the minimum. At age 65 under federal rules, that's exactly 4.00% annually. Keeping withdrawals at the floor reduces immediate tax friction and lets the remaining capital compound tax-deferred.
- Use the TFSA for unexpected cash needs. Rather than tapping the LIF above its minimum, the TFSA provides tax-free liquidity without adding to Carols' overall taxable income.
Over time, keeping the LIF at its floor means the balance shrinks gradually on its own, mandatory minimums stay manageable, and the overall tax drag stays low.
Not sure how your LIF fits into your overall income plan?
Scenario Lab+ lets you model your LIF alongside CPP, OAS, and your other accounts, including the annual minimums and maximums, across your full retirement timeline.
Try Scenario Lab+A Note on Unlocking: The RLIF Option
If your pension falls under federal jurisdiction, there is a one-time option that can give you more flexibility than a standard LIF allows.
Under the federal Pension Benefits Standards Regulations, if you are 55+, you can transfer your LIF into a Restricted Life Income Fund (RLIF). Within 60 days of establishing this RLIF, you can withdraw up to 50% of its value and transfer it directly to an RRSP or RRIF. That unlocked portion is no longer subject to LIF withdrawal caps, and the transfer does not consume your RRSP contribution room, since it moves as a direct transfer between registered vehicles.
A few things to keep in mind: the option is strictly one-time with no carry-forward. If you unlock less than 50%, you cannot access the remaining percentage under this provision later. The remaining balance in the RLIF continues under the same annual minimum and maximum rules as a standard LIF.
This can be a useful lever for federal pension holders who need more income flexibility, but the decision has lasting consequences and interacts with your broader tax picture. Make sure you discuss your options with a financial advisor before acting.
Putting It All Together
The ultimate optimization goal with a LIF is to coordinate your mandatory withdrawals with your other income sources to keep your tax situation manageable year after year. Because you can't simply pull whatever you need whenever you want, it pays to understand your withdrawal window well before you open the account.
If you want to see how your locked-in accounts fit into the bigger picture, our Scenario Lab+ tool lets you model LIRA and LIF accounts alongside your other savings, including the required minimums and maximums, so you can plan your income across 20 or 30 years.
Explore your retirement income options with our free Retirement Income Calculator, or work through your specific accounts with Scenario Lab+.
See How Your Locked in Assets Fit the Picture
Model your LIRA and LIF alongside CPP, OAS, and your other savings to build a complete retirement income plan.
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