How to Use Your TFSA to Double Your Annual Contribution

If you’re ready to unlock the full potential of your Tax-Free Savings Account (TFSA) and even aim to double your contribution over time, it’s time to go beyond the basics. While everyone knows about the annual contribution limit of $7,000 for 2025, few take advantage of the lesser-known strategies that can supercharge their TFSA’s growth. With a little planning and the right investments, you can achieve impressive returns. And a TSX stock like Manulife Financial (TSX:MFC) could be your ticket to success.

Max out

To begin with, consider maximizing the power of dividend reinvestment plans (DRIPs). Dividends are often viewed as a nice bonus, but reinvesting them can create a snowball effect. Over time, reinvested dividends purchase additional shares, which generate more dividends, compounding your returns without requiring extra contributions. Think of it as planting a single apple tree that eventually grows into an orchard. All within your tax-free haven of a TFSA.

Dollar-cost averaging is another underrated strategy. Instead of trying to time the market with a lump sum investment, which is nearly impossible to do consistently, invest smaller amounts at regular intervals. This approach lets you buy more shares when prices are low and fewer when they’re high, thus smoothing out the highs and lows of market volatility. It’s a steady, disciplined way to grow your portfolio without the stress of market timing.

Why Manulife

When choosing stocks for your TFSA, it pays to think long-term and focus on companies with strong fundamentals, consistent dividends, and a positive growth outlook. One standout on the TSX is Manulife. Manulife is a leading global financial services provider that excels in life insurance, wealth management, and retirement solutions. It’s the type of reliable, income-generating stock that can form the backbone of a robust TFSA.

Manulife’s recent earnings for Q3 2024 reflect its resilience in a challenging economic environment. The company reported record core earnings, driven by strong contributions from its global operations and innovative business solutions. Additionally, its growing wealth and asset management segment demonstrates its ability to capture opportunities in evolving markets.

One of Manulife’s key attractions for TFSA investors is its dividend yield. With a forward annual dividend rate of $1.60 per share and a yield of approximately 3.5%, the stock provides a steady stream of income. This is especially compelling when combined with a DRIP, as the reinvested dividends allow your investment to grow faster, tax-free, thereby creating a growth engine for your TFSA.

Looking ahead

Looking at its past performance, Manulife has consistently demonstrated stability and growth. While markets can be unpredictable, Manulife’s diversified global operations and strong balance sheet provide a buffer against economic shocks. Over the last decade, the company has expanded its footprint in Asia, Europe, and North America, positioning itself for sustained growth in both mature and emerging markets.

By incorporating Manulife into your TFSA, you can take advantage of a stock that not only pays you regularly but also has the potential for capital appreciation. Combine this with strategies like dividend reinvestment and dollar-cost averaging, and you create a recipe for long-term wealth accumulation. Remember, the key to doubling your TFSA isn’t just about contributions. It’s about maximizing what you already have.

To make the most of these strategies, stay engaged with your investments. Regularly review your portfolio to ensure it aligns with your financial goals, and don’t be afraid to rebalance if necessary. With a strong foundation, the right strategies, and a stock like Manulife, your TFSA can become a powerful tool for achieving financial freedom. It’s all about patience, discipline, and making the most of what’s in your control.