When Canadians ask how much money should be in a Tax-Free Savings Account (TFSA) to retire, the honest answer is: enough to generate meaningful tax-free income throughout retirement. The exact amount depends on your lifestyle, expected expenses, and other sources of retirement income. However, one thing is certain: the larger your TFSA, the more financial flexibility and security you can enjoy in retirement.
The TFSA is one of the best retirement tools available to Canadians because investment gains, dividends, and withdrawals are all tax-free. That means every dollar generated by your TFSA can go directly toward supporting your retirement lifestyle.
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How large should your TFSA be?
Rather than focusing on an arbitrary account balance, consider how much retirement income you will need. Start by estimating your recurring expenses, including housing costs, utilities, groceries, transportation, and leisure spending. Then determine how much of those expenses will be covered by government benefits, workplace pensions, RRSPs/RRIFs, rental income, or other investments.
Ideally, your TFSA should help fill any remaining income gap. For example, if your TFSA can generate enough tax-free income to cover essential monthly expenses, it can significantly reduce financial stress during retirement.
Unfortunately, many Canadians are still not taking full advantage of this opportunity. Statistics Canada data suggest that TFSA contribution room remains underutilized by a large portion of the population. As a result, maximizing contributions whenever possible should be a priority for long-term retirement savers.
Growing your TFSA for retirement
Building a substantial TFSA requires both consistent contributions and long-term investment growth. While every investor should choose investments that align with their goals and risk tolerance, stocks have historically delivered some of the strongest long-term returns among major asset classes.
The Canadian stock market, represented by the iShares S&P/TSX 60 Index ETF, is currently trading near all-time highs. For this reason, investors may want to consider dollar-cost averaging rather than investing a large lump sum all at once. Regular purchases can help reduce the impact of short-term market fluctuations while steadily growing a TFSA portfolio over time.
Another strategy is to focus on high-quality businesses with strong long-term growth prospects and purchase shares when valuations appear attractive.
A growth stock to consider
One company that may appeal to long-term TFSA investors is Brookfield (TSX:BN). Brookfield is a global alternative asset manager and diversified conglomerate that earns profits through asset management fees, ownership of real assets, and its wealth solutions and insurance operations.
Management has consistently targeted annualized shareholder returns exceeding 15% over the long term. While future returns are never guaranteed, Brookfield’s historical performance offers encouragement. Over the past decade, the stock has generated annualized returns of roughly 16%, compared with approximately 13% annually for the broader Canadian market.
In addition to its growth potential, Brookfield has increased its dividend for more than a decade, with a 10-year dividend growth rate of about 9.8%. Trading below $63 per share, the stock also appears to offer attractive value (a discount of nearly 20%) relative to the analyst consensus price target, making it a candidate for investors seeking long-term TFSA growth.
Investor takeaway
There is no universal TFSA balance that guarantees a comfortable retirement. The goal is to build a portfolio large enough to generate meaningful tax-free income alongside your other retirement resources. By maximizing contributions, investing consistently, and focusing on quality long-term investments such as Brookfield, Canadians can put themselves in a stronger position to enjoy a financially secure retirement.
