TFSA 101: How Retirees Can Earn $407.50 Per Month Tax Free for Decades

Retirees can buy top TSX dividend stocks at cheap prices right now for a TFSA focused on passive income.

| More on:
TFSA and coins

Image source: Getty Images

Canadian retirees are using their Tax-Free Savings Account (TFSA) contribution space to build diversified portfolios of top TSX dividend stocks that can generate reliable and growing tax-free income. The TFSA limit increased by $6,000 in 2022, and investors now have as much as $81,500 in TFSA room to create a self-directed pension.

TFSA income is not taxed, and the Canada Revenue Agency (CRA) does not include the earnings when determining net world income calculations for seniors. This is important for retirees who collect Old Age Security (OAS) and have incomes that are near the OAS pension recovery tax threshold. The earnings threshold in the 2022 income year is $81,761. Every dollar of net world income above this amount triggers a $0.15 OAS clawback in the July 2023 to June 2024 payment period.

The market correction is giving retirees a chance to buy top TSX dividend stocks at cheap prices for a balanced portfolio.


Enbridge (TSX:ENB)(NYSE:ENB) is a good example of a quality Canadian dividend stock to buy for a TFSA. The board has raised the dividend in each the past 27 years, and the distribution currently provides a 6.4% yield.

Enbridge moves 30% of the oil produced in Canada and the United States. The oil pipeline infrastructure is key to the smooth operation of the two economies. At the same time, Enbridge’s natural gas assets transport 20% of the natural gas used in the United States, and the company’s natural gas utilities supply the fuel to millions of Canadian homes and businesses.

Enbridge also has a growing renewable energy group with wind, solar, and geothermal sites. In addition, Enbridge is investing in hydrogen and carbon-capture projects as well as export terminals. Enbridge spent US$3 billion in 2021 to buy an oil export facility and connected infrastructure in Texas. The company recently announced a deal to take a 30% stake in the Woodfibre liquified natural gas (LNG) project in British Columbia. International demand for North American oil and natural gas is on the rise, and Enbridge is in a good position to take advantage of the opportunity.

The current $13 billion capital program should drive revenue and cash flow growth to support ongoing dividend increases and Enbridge has the financial firepower to make strategic acquisitions.

ENB stock trades below $54 per share at the time of writing compared to more than $59 in June. The pullback looks overdone and gives investors a chance to buy the stock at a nice discount.

The bottom line on top stocks to buy for passive income

Enbridge is just one example of a reliable dividend-growth stock retirees can buy for a TFSA focused on passive income.

The TSX is home to many top dividend stocks that look oversold right now, and investors can quite easily put tougher a diversified portfolio that would produce an average dividend yield of 6%. On a TFSA of $81,500, this would generate $4,890 per year in tax-free income that won’t put OAS at risk of a clawback. That’s $407.50 per month!

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool recommends Enbridge. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker owns shares of Enbridge.

More on Dividend Stocks

Canadian Dollars
Dividend Stocks

How I’d invest $1,000 in December to Make Easy Passive Income

These BMO covered call ETFs are great for generating passive income.

Read more »

golden sunset in crude oil refinery with pipeline system
Dividend Stocks

Advisor Commentary: Should You Buy Algonquin Power Stock? [PREMIUM]

Declines of this magnitude aren’t generally found in utility-land, and it behooves us to have a peek.

Read more »

TFSA and coins
Dividend Stocks

TFSA: 3 Buy-and-Hold Dividend Stocks With Massive Long-Term Potential

These dividend stocks could more than double your TFSA, all from reinvesting solid passive income for years to come.

Read more »

Dollar symbol and Canadian flag on keyboard
Dividend Stocks

These 4 Canadian Dividend Stocks Are a Retiree’s Best Friend

Dividend stocks are a retiree's best friend. But what about during a recession? Buy these four dividend stocks for solid…

Read more »

top TSX stocks to buy
Dividend Stocks

3 High-Yield Dividend Stocks to Earn a Truckload of Passive Income in 2023

High-yield dividend stocks such as Keyera and Fiera Capital are well poised to deliver consistent returns to shareholders in 2023.

Read more »

Senior Couple Walking With Pet Bulldog In Countryside
Dividend Stocks

Retirees: Supplement CPP With 3 Stocks That Pay You Every Month

Equity investors can supplement CPP payouts by creating a portfolio of monthly paying dividend stocks such as Savaria.

Read more »

Profit dial turned up to maximum
Dividend Stocks

Beat the Market With 2 Growing Companies

Dividend-paying TSX stocks such as Restaurant Brands International and Brookfield Asset Management are top long-term bets.

Read more »

Electricity high voltage pole and sky
Dividend Stocks

Should You Buy Algonquin Stock Now or Wait?

Algonquin Power stock has a massive 9.8% dividend yield today! Is now the time to buy or should income investors…

Read more »