It’s easy to assume that by the time Canadians reach age 70, their Tax-Free Savings Accounts (TFSAs) are brimming with wealth. After all, the TFSA has been around since 2009, offering more than a decade and a half of tax-free compounding.
With the ability to continue to add annual contribution room increases, the expectation is that most retirees should have built up sizable balances.
But the reality may surprise you.
Let’s dive into what the data show, and what Canadians who are nearing retirement may want to consider.
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What’s the current state of affairs?
Recent data suggests the average TFSA balance for Canadians in their late 60s and early 70s is far lower than many might expect. A number of credible sources peg the average amount for Canadians at age 70 within the range of $60,000 to $80,000.
While that’s certainly not insignificant, it falls well short of the six-figure (or even million-dollar) portfolios many investors assume are commonplace among retirees.
There are a few key reasons behind this gap.
First, not all Canadians have been able to maximize their contributions. The cumulative TFSA contribution room now exceeds $95,000 for those eligible since inception. However, many individuals have faced competing financial priorities. Whether that’s a mortgage, childcare, or unexpected expenses, there are plenty of factors that can limit one’s ability to fully participate in retirement savings vehicles.
Second, investment choices matter. A significant portion of TFSA holders have historically used these accounts for low-yield savings vehicles rather than growth-oriented investments. Holding cash or GICs inside a TFSA preserves capital, but it doesn’t harness the full power of tax-free compounding. Over time, this conservative approach can lead to dramatically smaller balances compared to portfolios invested in equities.
Third, withdrawals play a role. Unlike RRSPs, TFSAs offer complete flexibility, and many Canadians have tapped into these accounts over the years to fund large purchases, supplement income, or navigate financial challenges. While withdrawn room can be re-contributed later, not everyone does so consistently.
What’s the key takeaway for investors in or nearing this age group?
I think the key lesson for many investors, particularly those who are younger, is that investing early and on a schedule is a big deal.
Indeed, the TFSA remains one of the most powerful wealth-building tools available to Canadians, regardless of age. Even for those nearing or in retirement, optimizing asset allocation within a TFSA (by focusing on high-quality dividend stocks or long-term growth names) can meaningfully boost tax-free income and portfolio longevity.
In fact, a well-constructed TFSA portfolio generating a 4% to 5% yield can provide thousands of dollars in annual, tax-free income. Now that’s an attractive supplement to CPP and OAS.
The bottom line? While the average TFSA balance at age 70 may be lower than expected, it also highlights a significant opportunity. Canadians who take a more proactive, growth-oriented approach to their TFSAs can still unlock substantial value. That goes for those nearing or in retirement.
