The Tax-Free Savings Account (TFSA) is a crucial tool in a Canadian investor’s toolkit. The combination of smart investments and tax-free compounding means you can grow your TFSA balance at a faster pace than in any non-registered account. If you are looking to build a nest egg for retirement, you should be looking to use up your TFSA contribution space as quickly as you can.
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The average TFSA balance for 60-year-olds
Currently, the average TFSA balance for Canadians between the age of 60 and 64 is $39,756. That is an improvement from 2019, when the average balance was $32,211.
Yet, the current combined TFSA contribution limit is $109,000. That means that many people in their mid-sixties are likely not using their TFSA at all. The good news is that it is never too late to use the account to save and invest for retirement. The TFSA is easy to set up online or in-branch at almost any bank or financial institution.
As you move into retirement, you want to moderate risk. Many Canadians look to steady dividends for supplemental income inside their TFSA. If you are looking for some ideas in a TFSA, here are three stocks with an interesting mix of income and growth for the years ahead.
A stable real estate stock for retirees
If you are thinking about retirement, then why not buy a retirement stock? With a market cap of $6.8 billion, Chartwell Retirement Residences (TSX:CSH.UN) is Canada’s largest retirement community provider.
Chartwell had some major challenges during the pandemic. Fortunately, it survived, and today it has come out a stronger company. As a rising wave of baby boomers retire and downsize their homes, demand for Chartwell’s units is only increasing.
Yet, a new supply of senior’s communities is hardly keeping up with demand. That bodes very favourably for Chartwell’s rental rates. Likewise, the company has a solid balance sheet that will support acquisitions and developments.
This real estate investment trust (REIT) yields 2.8% and it pays a distribution monthly. So, if you want some regular tax-free income, Chartwell is a solid stock to hold in your TFSA.
A utility and infrastructure stock
AltaGas (TSX:ALA) is another defensive stock to hold in a TFSA. Investors get exposure to two interesting themes. First, it operates a network of gas utilities across the northern U.S. Second, it has an integrated midstream business in Western Canada.
The gas utility has opportunities to grow over the industry average rate in the coming years. Likewise, its midstream export business continues to enjoy rising sales to Asia. Improving natural gas prices is a tailwind, as is Canada’s focus on nation-building infrastructure projects.
AltaGas is aiming for 5–7% earnings per share growth and a similar rate of annual dividend growth. This stock yields 3% today.
A diversified services stock for a TFSA
Another stock ideal for a retiree’s TFSA is Exchange Income Corporation (TSX:EIF). This stock has been on a rip. It is operating at the right place, at the right time.
While it is a diversified business, its main revenues come from its airlines and air services that cater to Canada’s north. It just made a major acquisition of Canadian North airlines, which further multiplies its north exposure.
With Canada planning to expand infrastructure and defence capabilities in the Arctic, Exchange should see organic growth in the coming years. Exchange pays a 2.7% yield today. It pays that out monthly. It has been a steady dividend grower so it’s a great TFSA stock if you want rising income over the years to come.
