New investors are searching for strategies to create a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio that can generate income and capital gains for decades.
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Tax Free Savings Account
The Canadian government created the TFSA in 2009. In the past 16 years, the cumulative lifetime maximum TFSA contribution limit has increased to $102,000. The TFSA limit in 2025 is $7,000.
TFSA contributions are made with after-tax income. There is no restriction on withdrawals, and all profits earned on TFSA investments can be withdrawn tax-free. This provides good flexibility for younger investors who might be saving for a house, or for retirees who want to increase income without putting their Old Age Security (OAS) pensions at risk of a clawback.
RRSP
RRSP contribution space is determined by earned income reported on tax filings. In short, you get RRSP contribution room equal to 18% of your previous year’s taxable income. The amount is capped at $32,490 for 2025, which means 2024 income of $180,500. Contributions to company pensions count toward the RRSP contribution limit, so individuals need to pay attention to their tax slips.
RRSP contributions can be used to reduce taxable income in the relevant year. This is most beneficial for individuals in the highest marginal tax brackets. RRSP funds can grow tax-free inside the RRSP, but are taxed as income when removed. As such, a popular financial planning strategy is to contribute at a high marginal tax rate and withdraw RRSP funds in retirement at a lower tax bracket.
Younger investors might decide to invest inside a TFSA first, and save RRSP space until they are in higher tax brackets later in their careers.
Good investments for a retirement portfolio
People often make bets on stocks that get lots of media attention and have soared in short periods of time. It is possible to catch one of these early and score a big win, but it isn’t easy to do, and people often lose a lot of money this way when the party ends.
Retirement portfolios tend to focus on long-term growth. For new investors, it makes sense to consider stocks that have long track records of dividend expansion.
Companies that are leaders in their industries also tend to perform well over the long haul. When markets go through downturns, these stocks tend to become attractive picks as they usually bounce back to new highs on the market recovery.
Fortis
Fortis (TSX: FTS) is a good example of a TSX dividend stock that has delivered solid returns for decades.
The board increased the dividend in each of the past 51 years. Fortis grows through a combination of acquisitions and internal projects. The current $26 billion capital program is expected to raise the rate base from $39 billion in 2024 to $53 billion in 2029. As the new assets are completed and go into service, the added earnings should support planned annual dividend increases of 4% to 6%.
A $5,000 investment in Fortis 20 years ago would be worth more than $35,000 today with the dividends reinvested.
The bottom line
Owning good dividend-growth stocks is a proven strategy for building retirement wealth. Returns from FTS over the next 20 years might not be duplicated, but Fortis still deserves to be on your radar for a diversified retirement portfolio of top TSX dividend stocks.
