The sunset years are uncharted territory to many prospective retirees, notwithstanding the many stories of their predecessors. However, despite these first-hand accounts of life in retirement, the reality is different when it’s your time. Financial security will depend largely on planning and preparation.
Canadians have made the Tax-Free Savings Account (TFSA) a vital component of retirement planning to supplement the Canada Pension Plan (CPP) and the Old Age Security (OAS) pensions. Published data (as of 2022), however, suggests that the TFSA is underutilized, including account holders in their 50s.
The maximum accumulated contribution room, if you have not contributed since the TFSA’s inception in 2009 has risen to $109,000 this year. Many users say financial constraints prevent them from maximizing contribution limits, let alone making regular contributions.
Canadians in the age group 50–54 have an average TFSA balance of $26,479. Interestingly, the average increases by 25.5% to $33,242 for those aged 55 to 59. Expect the pattern to continue for 50-year-olds as retirement draws near. They can play catch up and still build a substantial retirement buffer in 10 to 15 years by using the massive amount of unused, contribution space.
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Preferred TFSA holdings
Canadian domestic stocks are preferred holdings in a TFSA as dividends from foreign stocks are subject to a 15% withholding tax. Enbridge (TSX:ENB) is a good single-stock investment if you want a yield-and-income play. Its 31 consecutive years of dividend increases lend confidence to invest in this energy infrastructure giant.
Exchange-traded funds (ETFs) are eligible investments in a TFSA, offering instant diversification through a balanced approach. You’d be investing in a basket of stocks instead of one. BlackRock’s iShares S&P/TSX Composite High Dividend Index ETF (TSX:XEI) has 75 holdings, with exposure across the TSX’s 11 primary sectors.
As of this writing, both ENB (+22.7%) and XEI (+22.4%) outperform the broader market’s single-digit year-to-date gain (+8.5%), notwithstanding the elevated volatility.
Dividend grower
Enbridge, a $171.5 billion industry titan, boasts a utility-like business model. Its diversified business mix (Gas Transmission, Liquid Pipelines, Gas Distribution & Storage, and Renewable Power) generates predictable cash flows.
ENB currently trades at $78.54 per share and pays a 4.9% dividend. The annualized dividend payout is a hefty $3.88 per share. If you invest $28,000 today, the money will compound to $58,480.30 in 15 years, including reinvestment of quarterly dividends.
Its President and CEO, Greg Ebel, acknowledges the volatile and complex conditions in 2026. Nonetheless, he said Enbridge is exceptionally well-positioned to deploy its $10 to $11 billion annual investment capacity to generate durable, long-term value for shareholders.
Sector diversification
The iShares S&P/TSX Composite High Dividend Index ETF aims to replicate the performance of the S&P/TSX Composite High Dividend Index and provide long-term capital growth to investors. The fund’s exposure is heavily weighted towards heavyweight sectors such as financials (32.4%) and energy (30%). Also, the Big Five Canadian banks are among the top 10 holdings.
Unlike ENB, the payout frequency is monthly. XEI trades at $38.99 per share, with a dividend offer of 3.5%. With the monthly distribution, a $28,000 position in June 2026 will balloon to $108,326.30 in 15 years. Broad sector diversification is protection against market downturns.
Potential asset
Canadians at age 50 have a potential asset in the rolled-over TFSA contribution room. A 15-year runway is sufficient time to engage in tax-free investing to ensure a comfortable retirement.
