TFSA: Turn $10,000 Into $100,000 for Retirement

Want to turn $10,000 into $100,000 relatively quickly? Use the TFSA, smart savings, and good stock picking to retire early.

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You don’t need a lot of initial cash to turn a TFSA (Tax-Free Saving Account) into a significant amount of money. You just need to be a disciplined saver, a patient investor, and long-term thinker.

The TFSA is the ideal place to compound money for the long-term because you pay no tax on the dividends or capital gains you earn. All your returns stay with you.

That means any money you make can be re-invested into more high-return opportunities. This might sound easy, but it is not. The stock market is volatile and swings rapidly up and down.

Investors have to be mentally prepared to sit on their hands through the violent variations in price. Fortunately, stocks have a great history of delivering good overall returns over the longer term.

The TFSA, savings, and elevated rates of return for an early retirement

In fact, if you invested $10,000 in your TFSA and earned a 7.6% average annual return (equivalent to the S&P 500 average over the past 20 years), you would have around $104,000 in 31 years. Start investing early and you can have a decent nest egg for retirement.

If you started with $10,000, but also invested $100 per month into your TFSA (at the same rate of return), you would end up with $101,000 in 20 years (nearly a third less time).

If you ramped up your savings rate to $250 per month (on top of the initial $10,000) and found a way to enhance your rate of return to 10% annually, you could be hitting $100,000 in 12 years or less!

The point being, save regularly, invest tax-efficiently in your TFSA, and pick a portfolio of high-performing stocks. The earlier you start, the quicker you can compound a nice nest egg for retirement. If you are looking for some stock ideas for that TFSA portfolio, here are two stocks I’d keep in mind.

TFII: A transport stock with outstanding returns

TFI International (TSX:TFII) is a major provider of trucking, logistics, and freight solutions in North America. The company has grown by acquiring over 100 regional or niche transport providers. It takes okay businesses and makes them great by focusing on profitability over volume.

Trucking is a low margin business, but TFI’s operating expertise has enabled it to financially outperform its peers. It has a great CEO and a strong balance sheet that can support long-term growth.

This potential TFSA stock has compounded by an average of 23% annually for a decade. If you only put $10,000 into TFI stock a decade ago, it would be worth $82,100 today.

WSP: A consolidator with more to go

Another stock that has compounded incredible returns for a TFSA is WSP Global (TSX:WSP). WSP has grown by consolidating the engineering, design, and consulting sector. Over the past two decades, it has added 100-plus businesses to its portfolio.

As the global population rises, demand for efficient and safe infrastructure is increasing. The U.S. infrastructure bill will help support several years of outsized industry growth. As one of the largest consulting and engineering firms in the world, WSP is very well-positioned to win from this.

WSP has compounded by around 21% per year over the past nine years. A $10,000 investment would be worth $67,600 today.

The Foolish TFSA takeaway

When building a TFSA portfolio, look for quality stocks like TFI and WSP for outsized portfolio returns. Make regular TFSA contributions and re-invest any dividends/profits, and you can be well on your way to retirement sooner than you hoped.

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 Robin Brown has positions in WSP Global. The Motley Fool recommends WSP Global. The Motley Fool has a disclosure policy.

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