RRSP to LIRA or LIF Transfer in Canada: What to Know at Retirement

As you approach retirement, managing your RRSP savings or former employer pension becomes one of the most important financial decisions. Many people are unclear about where to transfer their retirement funds or how to withdraw money in a tax-efficient way while maintaining steady income.

If you once worked for a company with a pension plan and have since left your job, you may already have or soon receive a lump sum to be transferred into a LIRA (Locked-In Retirement Account). And when retirement arrives, you’ll need a LIF (Life Income Fund) to start withdrawing those funds.

In this guide from TikiWealth, we’ll cover:

• What LIRA and LIF accounts are

• When and how to transfer funds

• The rules around withdrawals and how to avoid tax mistakes

1. What Is a LIRA?

A LIRA (Locked-In Retirement Account) is a type of retirement account that holds pension money after you leave a job with a company pension plan — but before you're ready to retire.

Since it’s "locked-in," you cannot withdraw cash from a LIRA at will. Its purpose is to preserve your retirement savings for your future.

You can open a LIRA with a bank, insurance company, or investment firm and continue investing the funds (in GICs, stocks, ETFs, etc.) — but withdrawals aren't allowed until retirement age.

2. When to Convert LIRA to LIF

Once you reach retirement age (usually 55+, depending on the province), you can transfer your LIRA into a LIF (Life Income Fund) to begin receiving income.

The LIF acts as a payout account for your locked-in pension money. However, the government sets annual minimum and maximum withdrawal limits to ensure your savings last throughout retirement.

Here’s a typical process:

• Transfer funds from LIRA → LIF (some provinces allow partial transfer to a RRIF)

• Start withdrawing income from LIF annually — taxed as personal income

• In certain hardship cases (e.g. high medical expenses), you may apply to unlock additional funds

3. Withdrawing from a LIF: Flexibility with Limits

Each year, the government updates the minimum and maximum withdrawal limits for LIFs. These are based on your age and account balance.

• You must withdraw at least the minimum (except in your first year)

• You cannot withdraw more than the maximum unless you apply to unlock it with valid justification

💡 Important Tip: Withdrawals from a LIF are treated as taxable income. A smart withdrawal strategy can help avoid jumping into a higher tax bracket.

4. Quick Comparison: LIRA, LIF, RRSP

Many confuse these retirement accounts. Here's a simple analogy:

• RRSP: Your personal retirement savings while employed

• LIRA: Locked-in company pension transferred after leaving your job

• LIF: Where you draw income from your LIRA during retirement

LIRA/LIF accounts are essentially the "locked-in" portion of RRSPs, and are governed by the pension laws of your province (e.g., Ontario, Alberta, BC).

5. Mistakes to Avoid When Managing LIRA/LIF

• Not understanding annual withdrawal limits, leading to unexpected taxes

• Withdrawing too early or transferring incorrectly, losing tax benefits

• Not investing within your LIRA/LIF — inflation erodes idle cash

• No withdrawal plan — leading to irregular or unsustainable retirement income

It’s highly recommended to consult with a financial advisor to determine the best time to convert from LIRA to LIF, and how to build a tax-efficient withdrawal plan.

Conclusion

Transferring from an RRSP or pension plan to a LIRA and eventually a LIF is a critical part of your retirement roadmap in Canada. Knowing the rules, timing your transfers, and having a smart withdrawal plan will help you:

• Maintain financial stability throughout retirement

• Maximize tax advantages

• Avoid unnecessary CRA penalties or tax burdens

📩 Already have a LIRA or received an offer to transfer your company pension?

Let TikiWealth help you assess your withdrawal options, ensure compliant transfers, and optimize your retirement investment strategy.

Book a 1-on-1 consultation today to make your retirement years secure and stress-free.