If you’re approaching the age of 45, you might be wondering whether or not your Tax-Free Savings Account (TFSA) and Registered Retirement Savings Plan (RRSP) accounts measure up to the averages.
At age 45, you’re about 20 years from retirement — the very definition of middle age. It’s a period in your life when retirement, if not right in front of you, is at least on the horizon. So, it makes sense to think about how your TFSA and RRSP accounts measure up to the averages.
Ultimately, what really matters is not so much how your TFSA compares to the average at age 45, but how it compares to the retirement money you expect to pull out of it in 20 or so years. With that said, comparing your TFSA to the averages is a decent starting point on the way to answering a more important question. So, let’s explore how much typical Canadians have in their TFSA and RRSP accounts at age 45.
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RRSPs
The RRSP is the main retirement account used in Canada. In recent years, the TFSA has been gaining in popularity, but the average RRSP balance is still much higher than that of the average TFSA.
According to recent StatCan data, the median RRSP balance for “late 30s to early 40s” and “late 40s to early 50s” is about $30,000 to $70,000. The mean is somewhat higher because ultra-high-net-worth Canadians drive up the average.
$30,000 to $70,000 is a pretty wide range. It represents an age range in which 45 years is the middle. That doesn’t mean that the average for 45 is exactly $50,000 — we can’t just assume that balances grow perfectly linearly with age — but it’s likely that it’s pretty close to that. So, I’d wager that the average RRSP balance for the most recent year we have data on is probably pretty close to $50,000.
TFSAs
Most Canadians have lower TFSA balances than RRSP balances. According to the most recent StatCan data, the average TFSA balance for Canadians between 40 and 50 ranged between $17,968 to $25,653 for 2023, the most recent year for which we have official data. This is a fairly wide range, and the exact figure for age 45 can’t be extrapolated with any precision, but it seems likely that the average for that specific age is close to $20,000.
Investing in your TFSA and RRSP accounts
Before I conclude, I should provide a note on investing in your RRSP and TFSA accounts.
An RRSP and TFSA are only as good as their holdings. So, you need to pick your investments well. It’s tempting to make two mistakes here:
- Not investing.
- Investing recklessly
There’s literally no point in holding RRSP and TFSA accounts if you don’t invest in them, as their entire value comes from sheltering investment gains. If you invest recklessly, with ultra-concentrated portfolios and such things, you risk actively losing money.
It’s better to invest moderately aggressively. This typically means investing in diversified equity portfolios, such as those provided by index funds.
Index funds are entire index-based stock portfolios that trade on the open markets. Take iShares S&P/TSX Capped Composite Index (TSX: XIC) for example. It’s an index fund based on the S&P/TSX Capped Composite Index, a list of 240 Canadian stocks published by S&P Global. The fund has 220 stocks. This is a pretty decent amount of diversification, and the 220 stocks represent the underlying index pretty well. The management fee is 0.05%, while the total expense ratio is 0.06%. So, this fund offers a mix of diversification and low fees — a winning combination. Overall, it might be suitable for many Canadians’ RRSP and TFSA portfolios.
