Just how much do you need in your TFSA (Tax-Free Savings Account) to retire comfortably? Well, it ultimately depends on your definition of what a comfortable retirement looks like. And while it’d be nice to have a TFSA worth a lofty six-figure amount, I do think that your TFSA is just one of many pillars of support for a retirement.
It might be an important one that helps you unlock the power of tax-free passive income (from dividends and distributions paid out by investments within a TFSA), but it should not be viewed as a sole pillar to help get one past the retirement finish line. Personally, I think the RRSP, TFSA, and non-registered account should be viewed as that magic trio that can help one retire well and on time (maybe even a bit ahead of schedule in spite of the effects of lingering inflation).
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The TFSA is just one piece of the retirement puzzle
Add the effects of CPP (and maybe OAS later on) into the equation, and you’ll have a better picture of where you stand with your retirement. In any case, this piece will have a closer look at how one can transform their TFSA into a tactical provider of income in retirement. Since capital gains and Canadian dividends will be tax-free, the TFSA might be one of the most powerful pillars within one’s retirement arsenal.
As for how much one should shoot to have in their TFSA for retirement, it depends on how much is elsewhere. Of course, if you don’t have an RRSP or minimal savings in a non-registered account, you’ll probably need the other accounts to pick up the slack. In any case, I think it makes little sense to isolate one account and shoot for a figure before retiring. Just like in a team sport, you need all accounts to play ball.
Either way, though, retirement is one of those things where there’s no one-size-fits-all solution. It depends on how much money you expect to come in and go out. If you’re not a traveller, perhaps you’ll need far less than someone else who wants a non-stop adventure every month in their golden years.
Enbridge stock
In terms of TFSA-worthy stocks that can produce significant sums of income, I do like the pipeline plays. Enbridge (TSX: ENB) is a name that stands out as a passive income favourite, and not only because the yield is far loftier than that of the TSX Index. As it stands today, the shares yield 4.9% — that’s quite low for Enbridge. But, when you also consider the track record of generous dividend increases, as well as the upside momentum riding behind the stock, it becomes more apparent that dividends and dividend growth are no longer the main attractions to the name.
As demand for vital energy transport infrastructure takes off, driven by structural tailwinds, I think it’s hard to bet against the name, just because the valuation is getting up there and the yield is moving to lows not seen in quite a while. At 27 times trailing price-to-earnings (P/E), you’ll pay a premium for shares, but it’s well worth doing in my view if you want steady, reliable income at the core of your TFSA.
