Hardship Withdrawal Exceptions and Boosting Retirement Income

Ask MoneySense

I am in B.C., Canada. I moved my LIRA into a LIF two years ago. I have taken the maximum annual withdrawals for each year. I thought it’d be smart to start taking it. How can I get more out of it? I need the funds to help deal with bill payments. All my monthly income is going to a mortgage now, and I have no extra money for anything else. I am trying to save my credit rating and cannot use credit anymore. Can it be transferred back into something that I can withdraw? Hardship clauses do not apply to me, but that does not mean I am not in trouble. I wish I had not done it. I have put myself in a terrible spot. This LIF is not my only income for retirement. I have another pension and full CPP and OAS. Any advice you have? I would greatly appreciate it.

—CM

Reversing the LIF

CM, if you are already withdrawing the maximum allowed from your life income fund (LIF) each year, it is unlikely you can legally extract additional money from the same account beyond those limits. The funds in a locked-in retirement account (LIRA) and a converted LIF are intended to provide retirement income over your lifetime, and the rules limit how much can be removed each year. That said, there are exceptions and alternative approaches worth reviewing. Below I explain key steps to confirm your options and outline other practical measures that may help improve your short-term cash flow.

Not all LIRAs and LIFs are the same

LIRAs and LIFs can be regulated either federally or by a province, and the rules for withdrawals and unlocking vary depending on where the plan is registered. Your first practical step is to confirm whether your account is under federal jurisdiction or registered in British Columbia. Contact the financial institution that holds your account and ask them which jurisdiction governs your plan and for the correct application or unlocking forms.

Once you know the registration, review that jurisdiction’s unlocking rules. The regulator’s unlocking application form is the authoritative source for what qualifies as an exception and what documentation you will need. If your LIF is registered in B.C., the B.C. Financial Services Authority publishes the relevant forms and guidance for unlocking pension funds; read the application carefully so you understand the qualifying conditions and required paperwork.

Financial hardship withdrawal exceptions for LIFs in B.C.

In B.C., a LIF may be unlocked for financial hardship if you meet one or more specific criteria. These typically include situations such as:

Having a taxable income below a specified threshold;
Mortgage arrears;
Facing eviction from rented accommodation and needing funds to secure a new principal residence or first month’s rent;
Significant medical costs that create financial distress.

If any of the above describe your circumstances, gather the documentation that proves your situation — for example, income statements, mortgage arrears notices, eviction or rental notices, and medical invoices — and discuss the process with the institution that holds your LIF. Eligibility is determined case by case, and an application is required.

Other ways to unlock your LIF in B.C.

Beyond financial hardship, there are other established exceptions that can permit unlocking or conversion of a LIF/LIRA in B.C. Typical options include:

Small-balance unlocking: accounts with a balance under a percentage of the year’s maximum pensionable earnings (YMPE) can be unlocked. For example, in 2024 the YMPE is $68,500, making 20% equal to $13,700;
Age-based unlocking: at age 65, smaller LIRAs or LIFs—those below a defined percentage of the YMPE—may be eligible for unlocking;
Permanent departure from Canada, which can allow unlocking under certain circumstances;
Terminal illness or shortened life expectancy, which may permit early access to funds.

Each exception has specific conditions and requires an application. Your financial institution can supply the required forms and advise on timelines and documentation.

What to do if you don’t qualify for unlocking your LIF?

If you cannot unlock your LIF under any exception, you will need to identify other sources of cash to manage immediate bills. I don’t know your full financial picture, but one helpful framework to structure options is the “3Cs” concept: Convert, Create, and Conserve. Thinking through these three areas can help you identify realistic actions and prioritize steps to stabilize your finances without eroding retirement savings.

The 3Cs: Convert, Create and Conserve

Convert: This means converting non-liquid assets into cash. Examples include downsizing your home, selling a vehicle you no longer need, or selling personal items such as jewellery or collectibles. Converting an asset can deliver a relatively quick cash infusion that reduces pressure on monthly expenses.

Create: Creating income can involve earning more money through part-time work, taking on temporary contract work, or renting a room in your home. It also includes improving returns on existing investments where appropriate and realistic. While creating income often requires effort and time, it can provide sustainable relief if it is feasible for your situation.

Conserve: Conserving means reducing outflows—cutting discretionary spending, negotiating lower interest rates on debts, consolidating or refinancing obligations, and seeking any mortgage relief or payment deferrals your lender may offer. Reducing expenses is rarely comprehensive by itself, but combined with conversion or creation strategies it can help bridge a difficult period.

Changing your mind about a LIF

I know this answer may not immediately free up more money from your LIF, but locking retirement savings is intended to protect long-term retirement income. Before trying to unlock funds, carefully weigh immediate needs against the long-term loss of retirement security. Take a methodical approach: confirm the legal status of your account, speak directly with the institution that holds the LIF, and, if you think you might qualify for hardship, prepare the supporting evidence and submit the application. If unlocking is not possible, explore the 3Cs to find other sources of cash and consult a licensed financial planner or trusted advisor who can review your complete financial picture.

If you can get through this period without further depleting your retirement savings, you will improve your long-term financial resilience. Reach out for help from your pension holder, a qualified planner, or community financial counselling services to create a short-term action plan tailored to your situation.