It is never too late to start contributing and investing in your TFSA (Tax-Free Savings Account). Certainly, the sooner the better, but who doesn’t benefit from earning income completely tax-free?
The TFSA is flexible, so it can be used for long-term retirement savings, for a cottage downpayment, or to help your kids through college. The key is to simply use the account and maximize the tax-free benefit.
Right now, the average TFSA fair market value for someone between the ages of 50 and 54 is $30,190. It is good to see that many 50-year-old Canadians are using their TFSA, as that average is up nearly $10,000 from peers in their 40s.
However, the average 50-year-old can contribute a combined total of as much as $109,000. Many Canadians are unfortunately not using the TFSA as much as they could.
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It’s never too late to invest in your TFSA
The good news it is never too late. Even a $30,190 TFSA compounded tax-free at a market rate of 9% could be worth as much as $109,000 by retirement (at age 65). However, if you maxed out your TFSA contribution today ($109,000) at the same investment rate, your TFSA could be worth as much as $397,000 by retirement!
If those investments were made outside of a TFSA, you could owe thousands of tax dollars when those investments are sold. Use the TFSA when investing, even if you can’t hit the average or the maximum.
Just take a bit of your salary per month and get it working tax-free for you. Smart investments and tax-free compounding can make a faster route to retirement. If you are looking for some smart investments for your TFSA, Pembina Pipeline (TSX: PPL) is a nice income option and Shopify (TSX: SHOP) is an interesting growth stock.
Pembina: A quality stock for income and growth
Pembina hits the mark from a return profile. In the past 10 years, its stock has compounded by a 4.5% compounded annual growth rate (CAGR). However, when you add in its 4.9% dividend, you get closer to a 9% average annual return.
Fortunately, future returns could be even better. This energy infrastructure stock should benefit from elevated energy prices due to the conflict in the Middle East. It could translate into better marketing pricing and more volumes through its network.
In the long-term, Pembina has growth from its LNG terminal coming into service (2028), data centre power opportunities (2030), and expansion of its collection and egress pipelines. It is targeting 5–7% annualized growth all the way to 2030. For income and modest growth, this is an attractive stock.
Shopify: A top Canadian growth stock for a TFSA
Shopify has been one of Canada’s best performing tech stocks. Even though its stock is down 19% this year, it is up 4,049% (45% CAGR) in the past 10 years.
Shopify is down due to fears about AI threats. While it is a concern to monitor, Shopify is already starting to use its own AI and agentic applications to help its merchants adapt to modern commerce. Its past two quarterly results have been exceptional. The company is starting to generate considerable free cash flow.
While it may not grow as fast as in the past, it still has a substantial runway ahead. You have to be comfortable with its elevated valuation. But if you believe in its growth story, this is a strong TFSA stock for the next 15 years.
