Many Canadians save diligently for retirement. But in a high-inflation world, even careful savers might be surprised to find that what they have may not stretch as far as they expected. Inflation quietly eats away at purchasing power over time. Add in market volatility and longer life expectancies, and it’s clear that Canadians need more than just a Tax-Free Savings Account (TFSA) and Registered Retirement Savings Plan (RRSP) balance. They need a smart, sustainable investment plan.
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The average
By age 45, many people are in their prime earning years. But that doesn’t always translate to big savings. The average TFSA balance for Canadians in the 45 to 49 age group is just over $21,000. And while the average RRSP balance for those between 45 and 54 comes in around $150,000, the median is just $70,000. That’s a big gap, and it means a lot of Canadians are falling behind. These accounts are great tools, but they won’t do much if they’re underused or filled with low-growth options.
Now, add inflation into the mix. Even at the Bank of Canada’s 2% target, the cost of living creeps up every year. And lately, inflation has been well above that. If your money isn’t growing faster than inflation, it’s effectively shrinking. Over 20 years, 2% inflation turns $100,000 into about $67,000 in real value. At 4%, that figure drops to just $45,000. That’s why simply saving isn’t enough. You need investments that grow and, better yet, ones that pay you along the way.
Closing the gap
That brings us to the type of investment many Canadians overlook: utility stocks. They’re not flashy, but they’re steady. And in times of uncertainty, that’s exactly what you want. Utility companies provide essential services like electricity and water. Demand stays stable no matter what the economy is doing. That makes them reliable revenue generators, which often translates into consistent dividends. These companies also tend to have regulated pricing, giving them predictable cash flow and protection from inflation.
One of the best utility options on the TSX is Hydro One (TSX:H). It’s the largest electricity transmission and distribution company in Ontario, delivering power to nearly 1.5 million customers. That provides a steady source of revenue. And because it operates in a regulated environment, it gets a predictable return on the capital it invests in its infrastructure.
Hydro works
In the first quarter of 2024, Hydro One posted revenue of $2.166 billion, up from $2.074 billion the year before. Net income was $293 million, or $0.49 per share, both up from the first quarter (Q1) of 2023. The company attributed its gains to higher demand and new transmission and distribution rates approved by the Ontario Energy Board. Its profit margins are healthy, and it has room to grow as Ontario continues to expand and modernize its grid.
Speaking of dividends, Hydro One pays about $1.33 annually. That works out to a yield of around 2.61% at recent share prices. It may not sound huge, but it’s stable and tax-free in a TFSA. And that yield could grow, too. The company has increased its dividend regularly since going public. In a high-inflation world, that kind of reliability matters. It can act as a hedge, helping offset rising prices with consistent income.
Hydro One also offers something else that’s increasingly rare in the stock market: low volatility. It doesn’t swing wildly with the economy or headlines. That’s because people still need power, whether the market’s up or down. This makes it a solid anchor in a portfolio that might also include more growth-focused or tech-heavy names. It’s not going to double overnight, but it’s not going to cut in half, either. And when you’re investing for retirement, that stability becomes invaluable.
Bottom line
Ultimately, the average TFSA and RRSP balances at age 45 aren’t enough to guarantee a comfortable retirement, especially with inflation in the mix. But that doesn’t mean it’s too late. Choosing the right investments can make a big difference. A stock like Hydro One can offer a safe foundation, steady returns, and growing income over time. Combine that with a consistent savings plan, and you’ve got a realistic path to financial security, even in a world where everything seems to cost more each year.
