Types of income from your LIF
You can obtain 2 types of income from your life income fund (LIF):
- a life annuity
- a temporary income, if your LIF provide it
Amounts withdrawn from LIRAs and LIFs are taxable.
Life annuity...for as long as you live!
A life income is the retirement income you can draw every year from your LIF until your death. You can apply for it at any age.
As with RRIFs (registered retirement income funds), you must withdraw the minimum prescribed under taxation rules. You are not required to make a withdrawal during the year in which the LIF is opened.
However, since the amount in your LIF must be sufficient to give you an income until your death, you cannot withdraw more than the maximum authorized for each year. The maximum is calculated on the basis of your age, the balance in your LIF and the reference rate set each year for LIFs.
At the beginning of each year, the financial institution calculates the minimum and maximum amounts that you are entitled to withdraw from your LIF during the year. You then receive the amount that you wish to withdraw according to the number of payments provided for in the contract with the financial institution.
Temporary income: an additional amount
You can withdraw an additional amount from your LIF, called a temporary income. However, your LIF contract must offer the option of a temporary income and you must apply each year to your financial institution.
When your financial institution receives your application for a temporary income, it calculates the amount that you can withdraw (if you are entitled to do so) and has you complete the required declarations.
Worth knowing about ...
A temporary income cannot be greater than 40% of the maximum pensionable earnings for the year in which the application is made, that is, 20 040 $ in 2012.
For more information