From Comfortable to Luxurious: Amplify Your Retirement Lifestyle With TFSA Income

Dividend-growth stocks can supercharge your TFSA.

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The Tax-Free Savings Account (TFSA) is an incredible tool for passive income. Unfortunately, most Canadians overlook this tool or mismanage it. The average Canadian rarely maxes out the contribution room and the capital held in these accounts is usually held in savings accounts with low interest rates. 

Here’s a look at the basic, typical TFSA and how you can elevate it to the next level to maximize passive income. 


A typical TFSA has a market value of roughly $23,000. These accounts also have an average unused contribution room of $38,000. Simply put, Canadians are leaving money on the table. 

Furthermore, these TFSA tend to be held in savings accounts at major banking institutions. Interest rates have escalated in recent years so a typical TFSA could be earning roughly 5% in passive income. But on a $23,000 balance, 5% is just $1,150 — barely enough to cover the cost of groceries for a family for a month. This is nowhere near comfortable retirement living. 


A maxed-out TFSA could be the key to a comfortable retirement. As of 2023, the cumulative maximum contribution room for someone who was eligible for the TFSA program since its inception is $88,000. 

Deploying that in a high-yield savings account, term deposit or Guaranteed Investment Certificates (GICs) could generate 5% in annual yield. That’s nearly $4,400 in tax-free passive income.

That should cover multiple months of groceries, utilities and travel for a typical retired person. Combined with other forms of retirement benefits, this lifestyle could be relatively comfortable. However, to upgrade your lifestyle you may need to take a more aggressive approach with your TFSA investments.  


A dividend-growth and reinvestment strategy could propel your TFSA to luxury status within 10 years. This is because some companies pay hefty dividends and expand their payouts over time, creating robust wealth for patient investors. 

For instance, Fortis and Enbridge currently offer dividend yields of 3.9% and 7.2% respectively. Over the past 10 years, they have expanded their dividends by annual rates of 6-7%. Other blue-chip stocks have similar track records. 

So, a portfolio of dividend-growth stocks should propel your TFSA to the next level. In fact, you could supercharge this by forgoing dividends and reinvesting these cash flows for 10 years. Here’s a hypothetical strategy:

  • Maxed out TFSA: $88,000
  • Portfolio average dividend yield: 5%
  • Portfolio average dividend growth: 5%
  • Portfolio average price appreciation: 5%
  • Annual contribution: $6,500
  • Dividend-reinvestment plan over 10 years

Based on these assumptions, the value of this TFSA could be raised from $88,000 to $331,842 within 10 years. If you discontinue the dividend-reinvestment plans at that stage, you could generate $16,592 in annual tax-free passive income. Combined with other retirement benefits, this strategy promises a luxurious retirement. 

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 Vishesh Raisinghani has no position in any of the stocks mentioned. The Motley Fool recommends Enbridge and Fortis. The Motley Fool has a disclosure policy.

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