Canadian Institute of Financial Planning (CIFP) Practice Exam – Free Practice Test & Prep

The statement that only LRIFs permit annuitants to withdraw the investment return is correct. In the context of retirement income plans, LRIFs (Locking-in Retirement Income Funds) allow for certain flexibility in withdrawals, including the ability to withdraw both the principal and the investment returns to some extent, within specified limits. This distinguishes LRIFs from LIFs (Life Income Funds), which primarily restrict withdrawals to a minimum annual amount based on a prescribed formula and often do not allow the payment of excess returns as easily as LRIFs do.

This characteristic of LRIFs makes them a viable option for annuitants seeking more access to their accumulated retirement funds, particularly for those who may want to benefit from market gains while still adhering to withdrawal limits set out for retirement income funds. Understanding these fundamental differences is crucial for financial planning, as it allows annuitants to select the most suitable option for their unique financial needs and retirement goals.