Are you approaching your mid-fifties and wondering whether your TFSA game is up to par?
It’s a natural thing to wonder about because – let’s be honest – you’re rapidly approaching retirement age. Decades ago, it was quite common for people to retire at age 61. These days, with inflation taking a bite out of people’s savings, it has become more common to retire in their mid-sixties and continue working part time after that.
Having a well-funded TFSA is a good way to avoid having to work in your late sixties, seventies, and beyond. In your mid-fifties, this close to the finish line, the decisions you make now will be crucial to making it to retirement in good shape. With that in mind, here is the average TFSA balance at age 54 in Canada, along with some tips on how to maximize yours.
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About $23,300
According to StatCan data from 2022, Canadians in the 50–54 age bracket had $20,000 to $23,300 in savings that year. TFSA balances tend to increase through a person’s working life, so 54-year-old Canadians likely averaged $23,300 – the top of the range – in 2022.
Since 2022, both Canadian and U.S. markets have been bullish, and Canadians have continued saving money. So, the true average TFSA balance for 54-year-old Canadians is likely higher than that observed in 2022. Nevertheless, the most recent hard data we have is from that year, so $23,300 is the figure I will go with. If the current average is higher than that, it is unlikely to be so to a great degree, as saving and investing tend to be slow processes.
What this means
If you’re 54 years old and your TFSA balance was $23,300 or higher in 2022, you were average to above average for that year. If you have that much in your TFSA right now, it is likely that you are slightly below average. Regardless, the real takeaway here is that the average TFSA balance in Canada – certainly in 2022 and probably today – is not nearly enough to retire on. Canadians usually have some RRSP money in addition to TFSAs, but most Canadians’ RRSPs are not adequate to pay for retirement either, averaging between $48,400 and $98,400. Until you have multiple hundreds of thousands, maybe a million, spread across RRSPs and TFSAs, there is work to be done.
How to maximize your TFSA balance
Having explored the average TFSA balance at age 54 in Canada, our next logical topic is, “How to maximize your TFSA balance.” As we’ve seen, most Canadians don’t have nearly enough in their TFSAs to retire on, not even at age 54, with the finish line fast approaching. So, it’s worth exploring how to increase your TFSA balance, so you have more than what you need when age 65 rolls around.
One of the best ways to increase your TFSA balance – apart from the obvious ones like “save more money” – is to invest in index funds. Index funds are pooled investment vehicles that trade on the stock market. They hold diversified portfolios while charging very low fees. They outperform 90% of active investors over the long term.
If you’re Canadian, a great index fund to get started with is the iShares S&P/TSX Capped Composite Index Fund (TSX: XIC). XIC is a highly diversified broad market index fund with very low fees – a 0.05% management fee and a 0.06% management expense ratio (MER, or all fund expenses combined). The fund tracks the S&P/TSX Composite Index, a highly diversified index based on 240 stocks. XIC actually holds 220 of the 240, meaning that it tracks its benchmark faithfully. It has a 2.3% dividend yield – higher than the S&P 500. Finally, the fund is very liquid and widely traded, resulting in low spread costs. Overall, it’s a great fund to hold in your TFSA as you wait for the magic of compounding to pave your way to a wealthy retirement.
