For Canadians approaching retirement, the Tax-Free Savings Account (TFSA) remains one of the most flexible wealth-building tools available. Yet the reality of how Canadians use it — and how much they’ve actually accumulated — can be surprising. According to Statistics Canada’s 2022 tax data, Canadians aged 60 to 64 held an average TFSA fair market value of $39,756 per individual.
Even if that amount were fully invested in the Canadian stock market and grew to roughly $65,000 by now, it would still fall short as a standalone retirement nest egg.
Fortunately, the TFSA is only one part of the picture. Many retirees also have Registered Retirement Income Funds (RRIFs), the Canada Pension Plan (CPP), and Old Age Security (OAS).
Still, understanding the average balance is useful — mainly because it highlights how important it is to continue building tax-free wealth heading into retirement.
Building TFSA income in retirement
Once full-time work ends, the financial focus shifts. Retirees aren’t just looking to grow capital — they need reliable income. One simple way to gain immediate diversification and dividend exposure is by using a broad Canadian dividend exchange traded fund (ETF). A popular option is the Vanguard FTSE Canadian High Dividend Yield Index ETF (TSX:VDY).
VDY has roughly $4.8 billion in net assets and invests primarily in large-cap, high-yielding TSX stocks. Its top holdings include Canada’s financial and energy giants:
- Royal Bank (15%)
- TD Bank (10%)
- Enbridge (8%)
- Bank of Montreal (6.8%)
- Bank of Nova Scotia (5.9%), and more
With 56% of its weight in financials and 27% in energy, VDY is diversified compared to owning single stocks — but it’s still heavily concentrated in two sectors. That concentration means the ETF will rise and fall with broader market sentiment toward Canadian banks and energy companies. In a correction, VDY can and has declined meaningfully.
At under $60 per unit, VDY trades at a reasonable trailing price-to-earnings ratio, but not an obviously cheap one. Its current 3.6% yield also sits below the 5% level it reached in late 2023, and that yield may not be sufficient for retirees looking to maximize tax-free income.
Why individual stocks still matter
Retirees who need stronger income growth often turn to hand-picked dividend stocks. But selectivity is crucial. Chasing the highest yields usually leads to trouble — extremely high yields often signal market expectations of a dividend cut. Slow-growth businesses can also put payouts at risk. A dividend cut hits twice: once from the lower income, and again when the share price falls.
One stock that consistently works well for retirement portfolios is Brookfield Infrastructure Partners L.P. (TSX: BIP.UN). This is an infrastructure business built for stability: it owns global, long-life assets across utilities, midstream infrastructure, transportation, and data operations. Roughly 85% of its cash flow is either contracted or regulated, and the same portion is indexed to inflation — ideal characteristics for dependable, rising income.
BIP has raised its distribution by 6.1% annually over five years and 7.7% over ten. Its most recent hike of 6.2% was right in line with that trend. At about $49 per unit, it yields 4.9%, and analysts believe it trades at a near 10% discount to fair value. Assuming stable valuation and ongoing cash-flow growth, long-term total returns around 11% per year are achievable. Volatility is part of the package, but dips of 10–15% may simply present opportunities to accumulate.
Investor takeaway
The average TFSA balance at age 64 may seem low — but the TFSA is just a part of the retirement savings. Retirees can still strategize to improve their income.
Whether through diversified ETFs or carefully chosen dividend growers like BIP, retirees can continue to build meaningful, tax-free income well into their later years.
