One of the most important tools for building wealth available to Canadians is the Tax-Free Savings Account (TFSA). The account allows tax-free compounding to take a front seat in a portfolio, meaning that any TFSA amount invested is able to grow faster.
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The TFSA amount Canadians need to retire
A comfortable retirement in Canada can require up to $60,000 per year in after‑tax income, depending on lifestyle and location. Government benefits like the CPP and OAS can cover part of that, but another income stream is needed to fill that gap.
That’s where the TFSA comes into play because withdrawals are completely tax‑free. This means that any TFSA amount contributed goes further than in taxable accounts.
Investors can reach that income target with steady contributions and by reinvesting dividends. To make the most of that TFSA amount invested, investors also need to pick the right stocks to invest in. Fortunately, there’s no shortage of great options on the market right now.
Here are three to consider today.
Start with a reliable long‑term dividend anchor
Canada’s big bank stocks are almost always at the top of any list to consider. In this case, Bank of Montreal (TSX: BMO) is a perfect addition to a TFSA portfolio. BMO is Canada’s oldest bank stock and has provided steady growth and dividends for two centuries.
The bank benefits from its strong competitive position, diversified earnings, and a very long track record of stability. In recent years, BMO has also expanded further into the U.S. market, where it now has a presence in 32 state markets.
Turning to income, BMO offers investors a quarterly dividend that works out to a yield of 3%. The bank also provides investors with annual upticks to that dividend and has maintained that streak for over a decade.
In short, allocated to an annual TFSA amount, BMO can easily become a core piece of a long‑term TFSA plan.
Add in a dependable defensive compounder
Like the big banks, Canada’s utility stocks offer a near-unprecedented defensive appeal. And among those utility stocks to consider, Canadian Utilities (TSX: CU) is known for its stability and consistency.
Canadian Utilities provides regulated utility service, which means that its earnings are predictable and supported by long‑term contracts. This reliability has allowed Canadian Utilities to build the longest dividend‑growth streak in Canada, currently sitting at 54 years.
This makes the stock one of just two Dividend Kings in Canada.
For TFSA investors, Canadian Utilities provides defensive strength and consistent income. Utilities tend to perform well during uncertain markets, and the company’s long history of dividend increases makes it a strong candidate for investors seeking long-term compounding within a TFSA. Its steady cash flows make it a low‑stress way to support retirement income.
In short, investors seeking a place to allocate a TFSA amount will find Canadian Utilities is a hard to ignore option.
Round out your TFSA with a high‑yield real estate income play
To complete the trio, investors can divert some of their TFSA amount to RioCan Real Estate (TSX: REI.UN). RioCan is one of Canada’s largest REITs, focused on retail and mixed‑use properties across major urban markets.
RioCan has maintained strong occupancy levels across its portfolio, supported by high‑quality tenants and well‑located properties.
For TFSA investors, RioCan offers an attractive yield that can boost income generation over time. As of the time of writing, RioCan offers a distribution of 5.2%, paid out monthly.
That mix of yield and real estate exposure makes RioCan a great addition to any TFSA portfolio.
Final thoughts
The trio of investments mentioned above can provide a steady stream of dividend income, given a consistent TFSA amount contributed over time. In fact, a $120,000 portfolio spread across the three stocks in a well-diversified portfolio can provide an annual income of nearly $4,900.
Here’s how the $120,000 TFSA amount can be allocated.
| Company | Recent Price | Total Invested | No. Of Shares | Dividend | Total Payout | Frequency |
| Bank of Montreal | $229.28 | $35,000 | 152 | $6.84 | $1,039.68 | Quarterly |
| Canadian Utilities | $51.06 | $35,000 | 685 | $1.84 | $1,260.40 | Quarterly |
| RioCan Real Estate | $22.51 | $50,000 | 2221 | $1.16 | $2,576.36 | Monthly |
| Total: | $4,876.44 |
