According to the latest Statistics Canada data for the 2023 contribution year, the average balance in the Tax-Free Savings Account (TFSA) for Canadians aged 70 to 74 was $56,106. On its own, that number seems reasonable. What may be more surprising, however, is that the average unused contribution room in this age group was $40,775.
That means many Canadians in their 70s are leaving a significant amount of tax-free investing potential unused. For retirees who want to supplement their income without increasing taxable earnings, this unused room represents a powerful opportunity.
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Why unused TFSA room matters
One of the biggest advantages of the TFSA is that investment income — including interest, dividends, and capital gains — is completely tax free. Withdrawals also don’t affect eligibility for income-tested benefits such as government retirement programs like the Old Age Security (OAS) and Guaranteed Income Supplement (GIS).
For many retirees, that flexibility makes the TFSA one of the most valuable financial tools available. Yet, the Statistics Canada data suggests thousands of dollars in potential tax-free growth is being left on the table.
Even conservative investors could benefit. If someone aged 70 or older invested the average unused contribution room of $40,775 into secure Guaranteed Investment Certificates (GICs) earning about 3% annually, it would generate roughly $1,223 per year in tax-free interest. While that may not sound dramatic, it’s meaningful extra income that could help cover utilities, groceries, or travel — without adding to taxable income.
Investing for stability and growth
The TFSA is flexible enough to hold many different types of investments, including cash, bonds, mutual funds, stocks, and exchange-traded funds (ETFs) listed on designated stock exchanges.
For retirees who don’t expect to use their funds for at least three to five years, diversified equity ETFs can potentially deliver higher long-term returns than cash or GICs. Popular examples include the S&P/TSX 60 Index through funds like iShares S&P/TSX 60 Index ETF and exposure to the U.S. market through the S&P 500 via the SPDR S&P 500 ETF Trust.
Dividend-paying stocks can also play a key role for retirees seeking steady income. For example, Canadian telecom giant BCE (TSX: BCE) currently offers a dividend yield close to 5%, with the stock trading around $35 per share.
BCE’s dividend is expected to remain supported by earnings and free cash flow with payout ratios estimated at about 70% and 63%, respectively. That suggests the company’s dividend could remain sustainable if its business performance remains stable.
A simple example of TFSA income potential
Diversification is always important, and concentrating too much money in a single investment is rarely recommended. However, it’s still helpful to illustrate what unused TFSA room could accomplish.
If the full $40,775 in unused contribution space were invested entirely in BCE shares, it could generate approximately $2,015 per year based on the company’s current annualized dividend of about $1.75 per share. Because the investment sits inside a TFSA, those dividends would be completely tax free.
For retirees looking to increase income without taking on excessive risk, even a diversified mix of dividend stocks, ETFs, and fixed-income investments could meaningfully boost annual cash flow.
Retiree takeaway
Statistics Canada data reveals that Canadians aged 70 to 74 had an average of $40,775 in unused TFSA contribution room. That unused space represents a valuable opportunity to generate tax-free income.
Whether invested in safe GICs, diversified ETFs, or dividend-paying companies such as BCE, putting that room to work could add hundreds — or even thousands — of dollars in annual income. For retirees seeking simple ways to strengthen their financial security, maximizing the TFSA remains a smart and often overlooked strategy.
