A Tax-Free Savings Account (TFSA) can become a powerful wealth-building tool when it has years of compounding behind it. By age 70, the average Canadian TFSA balance can still be surprisingly high, which shows how valuable it is to choose the right investments early and stay invested for the long term.
For retirees and near-retirees, that often means shifting toward steadier, income-producing holdings. Broad-market exchange-traded funds (ETFs) and dividend stocks can help keep a TFSA working without adding extra complexity.
Fortunately, there’s no shortage of great options on the market to choose from that can help to reach that goal.
Here’s a look at three picks to help meet or even surpass the average Canadian TFSA balance.
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Start with stability and broad exposure
The first option for investors to consider is iShares S&P/TSX 60 index (TSX:XIU). This is a broad market ETF, and one of the most widely held ETFs in Canada. In terms of composition, the S&P/TSX 60 Index ETF provides investors with instant diversification across 60 of the largest companies on the TSX.
Specifically, the ETF gives exposure to banks, energy companies, utilities, telecoms and other core segments. This helps to reduce risks associated with owning individual stocks, while still providing growth.
Another key point is that the S&P/TSX 60 Index ETF is a low-volatility holding, making it easier to hold through market cycles. In other words, there’s no need to manage it actively. Just buy it, hold it, and watch it grow.
That’s a key part of why the ETF has surged over 68% over the past five years.
Finally, prospective investors should note that the ETF also pays a dividend. As of the time of writing, the ETF offers a 2.25% yield. This provides investors with an income stream that can compound tax-free within a TFSA.
This makes the S&P/TSX 60 Index ETF a key component in helping investors meet or surpass the average Canadian TFSA balance.
Generate some income within your TFSA
Another option to consider is iShares Canadian Financial Monthly Income ETF (TSX:FIE). This ETF is an ideal choice for retirees looking to generate predictable cash flows.
As of the time of writing, the ETF pays a 4.61% yield, which is higher than that of broad-market ETFs. This makes it an attractive option for seniors looking to generate steady distributions.
As the name suggests, the fund is heavily weighted toward Canadian bank stocks and financial institutions, which are known for their stable, growing dividends.
The monthly payout is another appealing element of this ETF. Not only can this provide an easier-to-budget income stream for retirees, but it can also provide more frequent compounding for those still building that portfolio.
For investors looking to hit the average Canadian TFSA balance, the Canadian Financial Monthly Income ETF is hard to ignore.
The stock that remains a core TFSA holding for seniors
One final option for investors looking to meet the average Canadian TFSA balance is Fortis (TSX:FTS). Fortis is one of the largest utility stocks in North America, with operations across the U.S., Canada, and the Caribbean.
Utility stocks are great holdings because of their stable, yet attractive business models. As a regulated utility, Fortis generates a recurring and stable cash flow from the essential electric and gas services it provides.
That service is backed by long-term contracts spanning decades. This means that Fortis can continue to invest in growth and pay out its dividend.
That dividend currently offers a yield of 3.32%, making it a stable addition to any portfolio tasked with reaching the average Canadian TFSA balance. Even better, Fortis has provided investors with annual upticks to that dividend for over 50 consecutive years without fail.
For retirees, this means that Fortis is the low-volatility and dividend-growth pick to power a TFSA. This fact alone makes Fortis a must-have option in any well-diversified portfolio.
The average Canadian TFSA balance at 70
Meeting or exceeding the average Canadian TFSA balance at 70 is possible with the right investments. The trio of options above can meet that goal, given the appropriate time and investment.
In my opinion, one or all should be part of a larger, well-diversified portfolio.
Buy them, hold them, and watch your future income grow.
