So this is my first full year of being retired and officially just hit my LIF Withdrawal Ceilings! One of the funny things about retirement is discovering that even when your investments are doing well, the government still has rules about how much of your own money you can take out. I’ve now officially maxed out my annual withdrawals from BOTH my provincial LIF and my federal LIF. That’s right. Two accounts. Two withdrawal limits. And apparently, two reminders that I’m not entirely in charge of my own retirement money. 😂 The idea behind a LIF is to make sure you don’t blow through your pension money too quickly. I understand the logic, but here’s the thing: I’m not trying to spend my portfolio into oblivion. I’m trying to make it work for me. My investments generate income, I take what I’m allowed to withdraw, and I reinvest what I don’t need. And that brings me to the interesting part. Next year, I’m expecting my withdrawal room to increase because the money I’ve left invested continues to work for me. The reinvested distributions, along with any investment growth, can increase the account balance used to calculate next year’s maximum withdrawal. For my BC provincial LIF, there’s another wrinkle: the previous year’s investment return can also affect the maximum withdrawal. Another great problem to have😁 The federal LIF uses a different calculation, based primarily on the account balance at the beginning of the year and the applicable age-based percentage. So, while I can’t simply add all this year’s profits to next year’s withdrawal allowance, a growing portfolio can certainly help increase the dollars I’m permitted to take out. Of course, the government gets to decide how much I’m allowed to withdraw from these two accounts each year. But it doesn’t get to decide how much I enjoy retirement. There are worse problems to have than wanting to withdraw more money because your investments have grown! Imagine being told you’ve saved too much, earned too much investment income, and now have to wait until next year to take more of it out! I’ll take that problem over running out of money any day. How many other retirees are bumping up against their LIF withdrawal limits while their portfolios keep growing?
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35 Comments
Kyle T@kyletfreedom58 · 11d
Very frustrating situation for me. My LIF is my biggest account, and from what it produces in monthly income, I am allowed to withdraw a little over 2 months of that as my maximum. And I get to pay withholding taxes on anything over the minimum! So basically 10 months of distributions sit in the account which causes it to grow and grow into a nice plump cash cow the government will be pleased to take 50% of after my death. There's my retirement rant 😡
wolfie FIRE
@wolfie55 · 11d
I’m in BC where I can’t unlock my LIF. If you can unlock half of it into a RRSP/RRIF, do it. You have flexibility in those accounts to choose withdrawal size and timing (RRSP more so than RRIF).
Mario FF@sabinusbrutus · 11d
Getting my first withdrawal (approx. 6.2% maximum) from my LIF (transformed from LIRA once retired) in December ((QC). After 55 years, you can deplete the entire LIF if you are ok with the taxes).
Yves
@panther1963 · 11d
I will be in exactly the same boat as you are in when I retire. My distributions are already higher than the maximum that I will able to take out in 3 years when I retire
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