Build a $50K TFSA Nest Egg in 10 Years With This Dividend Stock

Creating a $50,000 nest egg costs way less than you think it will, especially if you follow these steps for the next 10 years.

| More on:
A golden egg in a nest

Image source: Getty Images.

There are a lot of investors out there who may be fearful that they’re reaching a point of no return and that it’s too late for them. They think they didn’t invest in time, and now they’ve missed out on funds they can never get back.

That couldn’t be more wrong.

Even if you’re a 75-year-old investor starting from scratch, it’s never too late. All it takes is a plan, a budget, and consistency. Let me show you how to create a $50,000 nest egg for your Tax-Free Savings Account (TFSA), starting with absolutely nothing.

First off, how much can you afford?

If you’re starting with nothing for your TFSA, that means, as of writing, you have contribution room of $88,000 in total. Of course, I’m not about to say you should put $88,000 into investments. Instead, you’re going to start small and work up to that $50,000 mark.

This could be done simply by putting aside $5,000 a year for a decade. Given that Canadians make on average about $61,000 per year, as of 2021 according to Statistics Canada, this could be a simple way to achieve it! But if you don’t have that cash on hand, you could still create that $50,000 nest egg.

But to do that, you need to figure out what you can afford. So, look over your budget. The last three months should definitely do the trick to figure out how your spending habits have changed since inflation and interest rates rose. Then you should be able to see where you can cut back and where you can afford to put money aside each paycheque.

And I do mean each paycheque

Rather than put cash into your TFSA whenever you feel like it, instead make automatic contributions that come out each paycheque. Treat it like a bill payment, and the sting won’t hurt at all. Instead, you’ll feel quite proud seeing your TFSA grow higher and higher!

From there, you simply need to drip feed into a strong stock that provides dividends. I would keep it simple and choose a Big Six bank. Right now is a great starting point, since they’re down a bit from the downturn. Further, you get stable passive income through dividends, and since there are provisions for loan losses, the stocks bounce back quickly even from recessions.

A great option to consider is Toronto-Dominion Bank (TSX:TD). It’s a solid growth stock among the banks and is one of the top 10 banks in the United States as well. Further, it’s been expanding with credit card partnerships into wealth and commercial management, and more. And with so many loan payment options, revenue continues to come in.

Creating a $50K nest egg

Now, for the proof behind this. We need to first look at the growth that TD stock has experienced to figure out how much it would take to create $50,000 in a decade. TD stock has grown at a compound annual growth rate (CAGR) of 11.7% in the last decade. TD stock’s dividend has also grown at a CAGR of 9.4% year after year. With that in mind, you can see in the chart below what growth could be like over the next 10 years.

YearShares OwnedAnnual Dividend Per ShareAnnual DividendAfter DRIP ValueAnnual ContributionYear End Shares OwnedYear End Stock PriceNew Balance

As you can see, you would just need 55 shares and the addition of $1,500 per year to reach over $50,000 in your portfolio. Those 55 shares cost $4,813.05 at this point. That $1,500 per year is just $58 bi-weekly! And your total investment would come to $19,813.05 over that decade from simple reinvesting.

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.

Fool contributor Amy Legate-Wolfe has positions in Toronto-Dominion Bank. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Happy diverse people together in the park
Dividend Stocks

Gen Z Investors: How to Make $2.8 Million Before Retirement

Gen Z investors have one thing to their advantage: time. Invest wisely and practically any investment could turn into millions.

Read more »

A plant grows from coins.
Dividend Stocks

The 2 Top Monthly Dividend Stocks for March 2023

These are the top two monthly dividend stocks you can buy in Canada in March 2023.

Read more »

Canadian Dollars
Dividend Stocks

Got $6,500? Earn $48/Month Tax-Free Passive Income

High-dividend-paying Canadian stocks include Diversified Royalty. Let's see how a TFSA investment of $6,500 can help you earn $48 in…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

Need $100? The Best Dividend Stocks for Monthly Income

Here are two of the best monthly dividend stocks you can buy in Canada right now for passive income.

Read more »

Businessperson's Hand Putting Coin In Piggybank
Dividend Stocks

TFSA Investors: Make $100 Per Month With This TSX Dividend Stock

This top TSX dividend stock could help you earn $100/month in tax-free, passive income.

Read more »

Wireless technology
Dividend Stocks

2 TSX Stocks I’d Buy With a Tax Refund

If you have a tax refund coming your way, these two TSX stocks could provide you with stellar long-term income…

Read more »

man window buildings
Dividend Stocks

How to Invest in Retail Stocks When Everyone’s Talking About a Recession

Canadian retail stocks like grocery stores provide stable performance. If you like more yield, you can seek an entry point…

Read more »

Canadian energy stocks are rising with oil prices
Dividend Stocks

The 3 Industrial Stocks That Keep Canada’s Economy Going

Three industrial stocks with solid fundamentals are safer options in the current market environment and should add stability to your…

Read more »