What Does the Average Canadian’s TFSA Look Like at 55?

A Tax Free Savings Account (TFSA) means different things to different Canadians. For someone in their 20s, a TFSA could mean a security deposit for an apartment; for a 35-year-old, it may be a house down payment or initial investment for their startup. For a 55-year-old, a TFSA could be their last leg to boost retirement savings while doing post-retirement tax planning.

What is the TFSA balance for a 55-year-old average Canadian?

Canadians often boost their TFSA contributions when they reach 55. That’s what the data says. According to Statistics Canada, the average TFSA contribution in the 2024 tax year increased to $13,157 for those in the 55–59 age group. It was $800 above the 2023 contribution, while the Canada Revenue Agency (CRA) increased the contribution room from $6,500 in 2023 to $7,000 in 2024.

The average TFSA balance, which includes the fair market value of investments, was $43,519, 46% of the cumulative contribution room for a 55-year-old. Investing more later cannot bring back the time lost when your money could have compounded. However, you could catch up a little by investing in growth stocks.

The investing mistake Canadians make

Many Canadians make the mistake of investing more in 3–5% yielding dividend stocks because one feels the older the age, the less risk one should take. Growth stocks are always associated with high risk. However, not having enough retirement savings is a bigger risk.

Consider investing in resilient growth stocks, and keep withdrawing profits and invest them in dividend stocks. That way, the downside risk is minimized, and you can get more returns from a lower investment amount.

TFSA stocks for Canadians at age 55

The best stocks for implementing the above strategy are Shopify (TSX: SHOP) or the iShares NASDAQ 100 Index ETF (CAD-Hedged) (TSX: XQQ) for growth. You could consider investing $10,000 in each and whenever that amount increases by 50% to $15,000, withdraw the $5,000 gain to invest in dividend stocks like CT REIT (TSX: CRT.UN).

Shopify has proved its resilience by growing revenue by 20% for four years in a row and free cash flow by high teens. The March dips and November-December rallies have made returns slightly predictable. The company is expanding globally and adopting artificial intelligence (AI) to assist brands in enhancing customers’ online experience. Shopify stock is down 36% from its previous seasonal high of $250. For the stock to reach its previous high, it will have to surge 58%, creating a perfect opportunity to buy the dip.

Shopify carries individual stock risk, which can be mitigated by investing in the XQQ ETF. The ETF replicates the Nasdaq 100 Index, giving you diversified exposure to upcoming tech trends across the technology supply chain from chips to software to end devices. The ETF has registered an average annual return of 13.5% in the last five years. This means the ETF takes a little over five years to double your investments, as per Rule 72.

The rebalancing dividend stock

When the above stocks grow your money by 50%, removing the capital gain within the TFSA can be done tax-free. Suppose you invest $10,000 in Shopify today, and by November, the value increases to $15,000. When you withdraw $5,000, that protects you from downside risk as you have already booked the profit. This money can now be converted into a passive income source with CT REIT.

Considering the average unit price of CT REIT is close to $19 in November, $5,000 can buy you 263 units, which will pay $21.50 per month in distributions. The REIT also offers a dividend reinvestment plan (DRIP), wherein you can use this money to buy more CT REIT units. Once you accumulate sizeable units, the payout will also be higher. Moreover, CT REIT grows its distributions at an average annual rate of 3%, hedging your payments against inflation. Meanwhile, your $10,000 remains invested in Shopify, allowing it to benefit from future share price rallies.

Assuming you successfully rebalance Shopify and CT REIT for four years, your annual dividend could grow to $1,049 without a DRIP, from only a $10,000 initial investment.