The Tax-Free Savings Account (TFSA) is one of the most powerful tools available to Canadian investors. With contribution room reaching $102,000 as of this year for those eligible since TFSA’s inception in 2009, Canadians of all ages can benefit from investing smartly in their TFSA. But how you allocate your TFSA — whether it’s your first $28,000 or a new top-up — should depend on your age, risk tolerance, and financial goals.
Here’s a breakdown of how different age groups might allocate a $28,000 TFSA contribution effectively.
In your 20s: Growth first and income later
Investors in their 20s would likely target to maximize their long-term compounding. They might allocate the $28,000 as follows:
- 60% Canadian and U.S. growth equities
- 30% global equity exchange-traded funds (ETFs)
- 10% cash or high-interest savings
Young investors have decades ahead to weather market volatility. This is the time to prioritize growth, even if it means higher short-term risk. A Canadian growth stock example is Shopify — a high-growth tech stock that’s volatile but has shown strong long-term potential. Pair it with low-fee ETFs like Vanguard All-Equity ETF Portfolio or iShares Core Growth ETF Portfolio for global diversification.
Here are some example holdings:
- $3,000 in Shopify
- $12,200 in VEQT
- $10,000 in a U.S. growth ETF
- $2,800 in cash or high-interest savings account (HISA)
In your 30s to 40s: Balanced growth and stability
Investors in their 30s to 40s might target to grow their assets while managing risk. Their allocation for the $28,000 may be something like:
- 50% equity ETFs (Canadian/U.S./International)
- 30% dividend stocks or real estate investment trusts (REITs)
- 20% bonds or guaranteed investment certificates (GICs)
In this life stage, many are juggling mortgages, childcare costs, and career changes. While growth remains important, stability and income start to matter more. Canadian dividend stocks like Fortis offer reliable income and defence — ideal for TFSAs, where dividend income is tax-free.
Here are some example holdings:
- $6,000 in Fortis
- $8,000 in iShares Core MSCI All Country World ex Canada Index ETF, essentially a global ETF that excludes Canada
- $4,000 in BMO Equal Weight REITs Index ETF
- $5,000 in a bond ETF like BMO Aggregate Bond Index ETF
- $5,000 in VEQT
In your 50s and 60s: Income and capital preservation
Investors in their 50s and 60s would want to protect their capital while generating a steady income.
They might have the following allocation:
- 40% dividend stocks and REITs
- 40% bonds, GICs, and fixed income
- 20% cash or HISA
As retirement nears, the focus shifts to protecting what you’ve built and generating income. Blue-chip dividend stocks such as Royal Bank of Canada (TSX:RY) or Enbridge are great TFSA candidates due to their generous and consistent dividend payouts. To elaborate further, Royal Bank of Canada stock has a solid 20-year dividend-growth rate of 8.9%. Its earnings and dividends are supported by a diversified business across personal and commercial banking, wealth management, and capital markets. Compared to most of its North American peers, it has demonstrated resilient earnings through the economic cycle that supports a safe dividend. At writing, Royal Bank stock offers a dividend yield of 3.5%, which is lower than its 10-year average yield of 3.8%. Its valuation also appears to be a bit rich. Therefore, interested investors should seek to buy on meaningful dips.
Here are some example holdings:
- $7,000 in Royal Bank
- $5,000 in Enbridge
- $6,000 in REITs (e.g., Granite REIT)
- $8,000 in laddered GICs
- $2,000 in cash
The Foolish investor takeaway
Your TFSA allocation should reflect your age, goals, and risk tolerance. Whether you’re chasing growth in your 20s or seeking income in your 60s, the TFSA can adapt to meet your needs. Make the most of the $28,000 contribution room by aligning your strategy with your stage of life — and let compounding do the rest, tax-free.
Remember to consult a financial advisor before making any investment decisions, especially as your personal circumstances change.
