Here’s the bottom line: if you’re 60 and your TFSA (Tax-Free Savings Account) balance is sitting around $45,000, you’re right in line with the average Canadian, which should worry you a little.
A $45,000 TFSA is a decent start, but it’s not a retirement foundation. The good news? There’s still time to change that, especially if you put your unused contribution room to work in the right investments.
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The average TFSA numbers tell a sobering story
According to Statistics Canada data, Canadians aged 60 to 64 have an average TFSA fair market value of approximately $45,109. That sounds like a lot until you run the math.
Under the popular 4% withdrawal rule, a $45,000 TFSA generates just $1,800 per year in tax-free income. That’s $150 a month.
Even if you hold double the amount in the RRSP (Registered Retirement Savings Plan) and receive a generous Canada Pension Plan payout, the monthly retirement income could be less than $2,000.
Even more striking is this: the same age group holds an average of $47,631 in unused TFSA contribution room. In other words, the typical 60-year-old has more unused room than they have invested assets.
Many Canadians park their TFSA money in Guaranteed Investment Certificates or savings accounts. That’s safe, but at a 5% return, $45,000 generates roughly $2,225 a year.
The TFSA can hold far more than GICs. It can hold exchange-traded funds, bonds, and individual stocks listed on major exchanges, which offers portfolio diversification. For a retirement that could last 25 to 30 years, you need growth above inflation. That means owning assets that compound over time.
This is where a stock like Brookfield Business Partners (TSX:BBU.UN) enters the picture.
Brookfield Business belongs in your TFSA
Brookfield Business Partners is a global private equity operator. It owns market-leading businesses in industrial services, business services, and infrastructure. The company is backed by Brookfield Asset Management’s trillion-dollar ecosystem: one of the most powerful operational platforms in the world.
In its most recent earnings call, Brookfield Business reported full-year adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of US$2.4 billion and generated more than US$2 billion in capital recycling proceeds. It repurchased US$235 million in shares at a significant discount to its net asset value of approximately US$54 per unit.
Brookfield Business President Anuj Ranjan was direct about the opportunity ahead. “The market backdrop for what we do is as attractive as it has been in years,” he said on the call.
The company’s portfolio company Clarios, a global battery manufacturer, has grown annual EBITDA by 40% since the acquisition, and management sees a similar level of growth over the next five years. That kind of operational improvement is what drives long-term share price appreciation.
For a TFSA investor at 60, that compounding is tax-free.
The Foolish takeaway
The average Canadian at 60 has a TFSA that isn’t working nearly as hard as it should be. With over $47,000 in unused room sitting idle and years of compounding left on the table, there’s still a real opportunity to change your retirement outcome.
Filling that contribution room with a high-quality growth business like Brookfield Business Partners — bought at a discount to its net asset value — could turn an average TFSA into a robust retirement engine.
