Financial hardship withdrawal exceptions and increasing income in retirement – MoneySense

First, remember the money in your locked-in retirement account (LIRA) or LIF is money intended to provide you with a lifetime income. Upon leaving your employer, your pension savings were converted into a LIRA, which again is intended to last you your lifetime.        

With most LIRAs, you can start making withdrawals at age 55. That’s done by converting a LIRA to a LIF. In some ways, LIRAs and LIFs are similar to registered retirement savings plans (RRSPs) or registered retirement income funds (RRIFs). Except with a LIRA, you can’t withdraw money like you can from an RRSP. And with a LIF, you are limited to a maximum withdrawal amount, whereas with a RRIF, you can withdraw as much money as you like.

Not all LIRAs and LIFs are the same 

There are federally and provincially regulated LIRAs and LIFs. And, when it comes to withdrawals, exceptions and unlocking privileges, you need to check if your LIRA and/or LIF is a federal or provincial plan, as they each have their own set of rules. If you’re not sure where your LIRA and/or LIF is registered, call the financial institution holding your account.

Once you know how your LIRA and/or LIF account is registered, go to that jurisdiction’s website to review its unlocking rules. The best thing to do is to download the unlocking application form and give it a read. Typically, it’s not that difficult to understand.

CM, for you, go to the B.C. Financial Services Authority website and download the application. On the site, you will see you can withdraw additional monies from your LIF, over the maximum withdrawal limit, if you are facing financial hardship. You mentioned you don’t qualify, but let’s review the financial hardship exceptions, just in case.

Financial hardship withdrawal exceptions for LIFs in B.C.

To qualify for financial hardship for a LIF in B.C., you must meet one or more of the following criteria:

1. Your taxable income is less than $45,667.
2. You have mortgage arrears
3. You are facing eviction of a rented home, and you need the funds to secure a new principal residence or first month’s rent.
4. You have medical costs.

Other ways to unlock your LIF in B.C.

In most cases, a person will unlock their LIF in one of the following ways instead of applying for financial hardship.

1. At any age, a LIRA and/or LIF with an account balance of less than 20% of the year’s maximum pensionable earnings (YMPE), $68,500, can be unlocked. In 2024, the YMPE is $68,500, and works out to $13,700.00;
2. Once you turn 65, you can unlock your LIRA and LIF, if they contain less than 40% of the YMPE, which is $27,400 for 2024;  
3. Permanent departure from Canada;
4. Or, your life expectancy has been shortened.

No matter which exception you qualify for, you must apply. The financial institution holding your investment account can provide you with the necessary forms.