What is a key difference between a Life Income Fund (LIF) and a Registered Income Fund (RIF)?

The key difference that makes the choice about the Registered Income Fund (RIF) having a maximum withdrawal amount correct lies in the regulatory framework governing these types of funds.

A RIF is structured in such a way that it requires holders to withdraw a minimum annual amount each year, but it also imposes limits on the maximum amount that can be withdrawn. This means that individuals using a RIF must adhere to certain withdrawal guidelines, which help ensure that funds last throughout retirement. This feature prevents account holders from depleting their retirement savings too quickly, promoting financial security over the long term.

In contrast, a Life Income Fund (LIF) is typically used to receive funds from a pension plan and is designed to provide income for retirees. While LIFs also have minimum withdrawal requirements, they do not have a maximum limit on withdrawals; this allows users more flexibility in managing their funds. The absence of a maximum withdrawal limit in LIFs reflects their unique design, which is focused on providing income throughout retirement without the same restrictions that apply to RIFs.

Thus, the inclusion of a maximum withdrawal limit in RIFs is a defining characteristic that distinguishes them from LIFs, making this choice the correct answer.