Here's the Average Canadian TFSA and RRSP at Age 35

Here’s the Average Canadian TFSA and RRSP at Age 35

The TFSA and RRSP can be a winning combination for investors, but you’ll need to make the right investments.

Amy Legate-Wolfe ❯

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest.

Published January 7, 8:45 pm EST

At age 35, many Canadians find themselves at a pivotal moment in their financial journey. Balancing career growth, family responsibilities, and long-term financial goals can feel overwhelming. However, this stage of life is also a fantastic time to optimize your savings through vehicles like the TFSA (Tax-Free Savings Account) and RRSP (Registered Retirement Savings Plan).

On average, Canadians in their mid-30s have a TFSA balance of approximately $15,186, and for RRSPs, the average balance is around $82,100. These accounts, when used strategically, can be powerful tools to grow wealth and create passive-income streams, thereby setting you up for a more comfortable retirement.

A winning combo

The TFSA is a versatile savings account where contributions, growth, and withdrawals are completely tax-free. This makes it ideal for both short-term goals and long-term wealth accumulation. However, the RRSP is a tax-deferred account that allows contributions to reduce taxable income. While withdrawals from an RRSP are taxed, this often occurs during retirement when your income (and tax rate) is likely lower. By using these accounts together, you can balance flexibility with tax efficiency, tailoring your investment strategy to suit different life stages and financial goals.

Creating passive income within these accounts involves choosing the right investment vehicles. These include dividend-paying stocks, exchange-traded funds (ETFs), or real estate investment trusts (REITs). In a TFSA, dividend income is completely tax-free, maximizing the power of compounding. In an RRSP, dividend income grows tax-deferred, meaning the capital has more time to build before it’s eventually taxed during retirement withdrawals. This makes it possible to create a sustainable stream of income for retirement while also benefiting from significant tax advantages.

Consider ZEB

A particularly compelling option for Canadians is BMO Equal Weight Banks Index ETF (TSX:ZEB). This ETF offers equal exposure to Canada’s six major banks. The ETF currently trades around $42.35 as of writing, with a dividend yield of 3.93%. These dividends are distributed regularly, making ZEB an excellent choice for those seeking steady passive income. Canadian banks have a long history of reliable dividends and are considered some of the safest financial institutions globally, thanks to strong regulation and diversified operations.

ZEB’s equal-weight structure ensures that each bank has an equal influence on the ETF’s performance, reducing the risk of over-reliance on any single institution. This approach provides investors with diversification within the financial sector. For instance, if one bank underperforms due to specific challenges, its impact on the overall ETF is minimized. This balanced exposure to the banking sector is a significant advantage, especially in times of economic uncertainty.

In terms of performance, ZEB has delivered consistent results. Over the past year, the ETF has provided a return of 26%, reflecting the strong recovery of the Canadian banking sector post-pandemic. Its three-year annualized return of 7.47% highlights its stability and resilience over longer periods. With $4.43 billion in net assets, ZEB is also a highly liquid ETF, making it a dependable choice for both individual investors and institutions. These attributes make it a compelling candidate for inclusion in both TFSAs and RRSPs, depending on your investment strategy.

Foolish takeaway

Looking to the future, Canadian banks are well-positioned for continued growth. Canada’s banks are diversifying their operations internationally, particularly in high-growth regions like Latin America and the United States, thereby further supporting their long-term prospects. By investing in ZEB, you’re essentially investing in the backbone of the Canadian economy, with the added benefit of receiving regular dividend income.

Investing in ZEB is not just about earning dividends. It’s about creating a balanced approach to long-term wealth generation. With its strong historical performance, attractive yield, and exposure to some of the most stable companies in Canada, ZEB represents an excellent opportunity for Canadian investors at 35 to begin building a reliable and growing passive-income stream. Whether your goal is early retirement, a dream vacation, or financial independence, a thoughtful approach to leveraging TFSAs, RRSPs, and investments like ZEB can make your aspirations a reality.