Your Blueprint to Build a 6-Figure TFSA

Know the blueprint or near-perfect strategy on how to build and achieve a 6-figure TFSA.

The total allowable contribution in a Tax-Free Savings Account (TFSA) in 2025 has reached six figures. Canadian savers welcome the yearly increases in contribution limits, and the cumulative amount for anyone eligible since 2009 who has yet to open a TFSA is now $102,000.

Remember that your TFSA contribution room is not based on income level. Thus, Canadians 18 years old and above can use the versatile investment account to build a 6-figure TFSA. Everyone has an equal chance to hit $1 million or more in a TFSA and draw tax-free passive income from it come retirement.

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.

Source: Getty Images

Incredible power

The TFSA’s incredible power stems from its tax-free feature. All interest, gains, and income earned inside the account are tax-exempt. The blueprint to achieve a $1 million balance is to save, contribute consistently, and invest in income-producing assets like stocks. No worries about unused contribution room because it can carry over to the following year.

Besides regular contributions, TFSA investors holding dividend stocks accelerate their balances by reinvesting the dividends to earn compound returns. This near-perfect strategy transforms your savings into a fortune and pension-like income in retirement. Furthermore, TFSA withdrawals are tax-free.

Monthly dividends

The payout frequency of most Canadian dividend payers is quarterly, but a select few pay monthly dividends. This allows faster principal compounding as you can reinvest dividends 12 times a year, not four. A solid choice for TFSA users to start the year is Freehold Royalties (TSX: FRU).

At $13.14 per share, the energy stock pays a hefty 8.2% dividend. The $7,000 contribution limit can purchase 532 shares and by reinvesting the dividends, the money will grow to $54,192.50 in 25 years. If the limit in 2026 is the same, a $7,000 investment will compound to another $50k in 25 years. You’d have more than $100,000 in your TFSA by then.   

Freehold Royalties has vast land holdings in Canada and the U.S., owning mineral titles and royalties on oil and gas properties. The $2.2 billion oil and gas royalty company collects long-duration royalties from North America’s top drillers and industry operators.

Given the low-cost structure and zero maintenance capital, Freehold generates robust funds from operations to support dividend payments. This top-tier energy stock hasn’t missed a monthly dividend payment since January 2017.

Ideal complement

Atrium Mortgage Investment Corporation (TSX: AI) is an ideal complement to Freehold Royalties because it also pays monthly dividends. At $11.07 per share, you can partake in the 8% dividend. The $521.5 million non-bank lender operates in Ontario and Western Canada.

It provides residential and commercial mortgage services as well as various types of loans, including bridge, construction, and development financing.

As a MIC, Atrium implements conservative risk parameters to ensure stable and secure dividends. At the close of Q3 2024, 97.3% of the total portfolio is first mortgages and the loan-to-value of 90.3% is <75%.

The financial services stock is a reliable dividend payer, evidenced by the uninterrupted dividend payment record since 2001. Moreover, AI has paid special dividends every year since 2013 on top of the regular dividends.  

Game-changing milestone

Reaching a 6-figure TFSA is a daunting task but achievable. Execute the blueprint mentioned above to unlock your TFSA’s incredible power.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends Freehold Royalties. The Motley Fool has a disclosure policy.

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