Typically, it’s best not to compare ourselves to others when it comes to financial milestones. That said, it is quite important to have a benchmark or a high watermark so that you can shoot for a realistic goal. Whether that goal entails being at the average compared to most other Canadians, in a higher percentile, or not falling behind by all too much.
Even if you are behind the average, though, you can treat it as motivation to make moves to make up for lost time. At the end of the day, the Tax-Free Savings Account (TFSA) savings growth is more of a multi-decade marathon than a sprint to the finish line. You’d be surprised how a change of behaviour can make over just five years or so.
Either way, the typical TFSA balance at age 55 seems to be in a fairly broad range. In my humble opinion, it makes more sense to look at the median, given that the top percent of earners tend to skew the figure higher. Either way, fellow Fool contributor Aditya Raghunath highlighted that the average balance for the TFSA of a Canadian between the ages of 55 and 59 is $33,200. For someone on the lower end, the figure is likely thousands less.
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Don’t shoot for average with your TFSA. Go for the gold medal!
While I don’t have the concrete “single figure” that you’re looking for, I would pin the $27,000 zone as a good ballpark to shoot for if you’re in your 50s and are looking to shoot for average. If you’re closer to 35 or 44 and you’re well above the mark, you should give yourself a nice pat on the back. However, if you’re in the $10,000 to $20,000 range, do not fret.
Why? It simply means moving a few levers can help you hit your TFSA goals sooner. Whether that means tightening the belt to maximize savings or prioritizing your TFSA over other accounts, there are ways to hit the targets far sooner than you’d think.
Either way, once you’ve got a $27,000-30,000 TFSA (or much higher if you’ve got the ambition), the key, in my opinion, is to invest the proceeds in high-quality stocks that can actually grow your TFSA tax-free! Indeed, so many Canadians may have the TFSA funds in Guaranteed Investment Certificates or savings accounts. That will limit your growth and hold your TFSA back from really flourishing. So, the big takeaway, I think, is to set your TFSA up for growth after you’ve contributed. That means owning stocks for the long term.
Think dividend-growth icons that have margins of safety
If you’re 55, you might be more than a decade away from retiring. As such, you may wish to invest with the next decade in mind. Solid stocks like CN Rail (TSX: CNR) might be at a decade-long discount. And while the stock is out of favour today, I do think the next decade isn’t going to be as rough a ride as the past 10 years. Either way, the rise of tech could actually make CN Rail and other rails more efficient as they scale with fewer bottlenecks.
All considered, I find a wide-moat firm like CN to be a perfect fit for a TFSA, especially if you’re in the last stretch of your career. Some 55-year-olds might want more or less growth, but personally, I think Steady Eddie dividend growers are your best friend. Do contribute to your TFSA and do think about solid investments to put the proceeds in! And the next thing you know, you’ll be well ahead of the crowd of TFSA savers for your age.
