Approaching 60 can feel overwhelming. Not only does the energy level reduce, but the retirement time bomb starts ticking. You start counting your assets, savings, expenses, and debt. Those who have been delaying investments suddenly fire all cylinders, putting a significant portion of their income into retirement savings. These traits are visible in Statistics Canada’s Tax-Free Savings Account (TFSA) statistics for the 2023 and 2024 tax years.
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Typical TFSA balance for Canadians approaching 60
| TFSA Statistics (2024 tax Year) | 50–54 | 55–59 | 60–65 |
| Average Contribution | $11,942 | $13,157 | $13,996 |
| Avg Fair Market Value (FMV) | $35,235 | $43,519 | $52,381 |
| Cumulative Contribution (CC) | $95,000 | $95,000 | $95,000 |
| FMV/ CC | 37% | 46% | 55% |
| TFSA Statistics (2023 tax Year) | 50–54 | 55–59 | 60–65 |
| Average Contribution | $11,051 | $12,302 | $13,167 |
| Avg Fair Market Value (FMV) | $30,190 | $37,600 | $45,109 |
| Cumulative Contribution (CC) | $88,000 | $88,000 | $88,000 |
| FMV/ CC | 34% | 43% | 51% |
As the age increased, there was a significant jump in average TFSA contribution. They are catching up on the unused TFSA contribution room. The average TFSA balance as a percentage of cumulative contribution increased from 37% to 55% as we progress from age 50 to 60. Moreover, this percentage has increased from the 2023 tax year, hinting that Canadians are becoming more aware of the benefits the TFSA brings post-retirement.
Which is better for post-retirement income: TFSA or RRSP?
There is a common misconception that a Registered Retirement Savings Plan (RRSP) is the ideal retirement tool. The RRSP is more of a tax savings tool to encourage Canadians to stay invested for the long term.
That’s because when given the option to withdraw without consequences, people do not stay invested. That is what happened with the TFSA. Average withdrawals are similar to average contributions. Thus, less than 50% of the contribution room is used by Canadians, because they keep withdrawing.
If you can maintain financial discipline, TFSA benefits far outweigh those of the RRSP.
RRSP: At age 50 and above, you may be at the peak of your earnings and need to save tax. RRSP contributions are tax-deductible, so you save up on your tax bill. However, RRSP withdrawals are taxable. It merely defers tax payments from high-income years to low-income years. Your tax savings are limited to your contributions. Moreover, RRSP withdrawals are added to your taxable income, which increases the possibility of Old Age Security (OAS) clawback.
TFSA: Meanwhile, you contribute after-tax income to a TFSA, and thereafter you need not report any income or capital gain you earn from your TFSA investments in income tax. So if your $10,000 becomes $100,000, it’s tax-free. Also, you get full OAS as TFSA withdrawals do not count as your taxable income.
Why choose a TFSA for retirement savings at age 60?
Many Canadians nearing 60 are realizing the tax benefit the TFSA offers and why it is the ideal account for a comfortable retirement. There are no restrictions on your withdrawals. It is a gold vault for those who can take control of their finances and reduce the temptation to cash out.
Even if you withdraw from a TFSA, the withdrawn amount gets added back to your contribution room on January 1 of the next year. It is your decision whether you want to contribute or not. RRSP withdrawals before retirement have to be recontributed within 15 years, or you must add that amount to your taxable income.
The RRSP forces you to invest long term, and as per the Canada Revenue Agency’s (CRA) conditions. The TFSA gives you the freedom to invest the way you like, as long as you are not trading and securities are traded on regulated exchanges.
Best stock for a 60-year-old Canadian
If you are catching up on the lost time and can still commit five years to investing in a TFSA, consider investing in Celestica (TSX: CLS). It is no longer just an electronics manufacturer. It is an original design manufacturer (ODM), which means it designs, tests, manufactures, and also provides after-market services.
What does it manufacture? Ethernet switches for artificial intelligence (AI) data centres and cloud networks. Celestica has landed three hyperscaler clients, of which two will start generating revenue from the second half.
Celestica could double or even triple your investment in the next five years, making it an ideal TFSA pick.
