Which type of account allows immediate tax-free lump-sum withdrawals before a certain age?

The correct choice is the Life Income Fund (LIF), which allows for immediate tax-free lump-sum withdrawals up to a certain age as outlined by the pension legislation. LIFs are created from locked-in retirement accounts and are designed to provide income during retirement while adhering to specific withdrawal limits set by regulatory authorities.

The capability for immediate tax-free lump-sum withdrawals reflects the flexibility that LIFs offer. A LIF is often established when an individual moves funds from a pension plan to ensure that they have steady access to retirement savings while complying with withdrawal regulations that still allow for some level of tax planning.

In contrast, Registered Retirement Income Funds (RRIFs) and Registered Retirement Savings Plans (RRSPs) have different withdrawal rules. Specifically, RRSPs do not allow for tax-free withdrawals; any amounts withdrawn are fully taxable income in the year they are taken out. RRIFs allow for withdrawals but also do not permit tax-free lump-sum distributions; they are subject to minimum withdrawal requirements that are taxable.

Locked-in Retirement Income Funds (LRIFs) share similarities with LIFs, but the specifics around taxation and withdrawals differ and may depend on the province of residence. While LRIFs can provide flexibility, they still