Everybody’s TFSA or RRSP growth journey is unique, and because of that, I’d argue that one shouldn’t look to compare oneself to others. That said, if you’re in a spot to make up for lost time, I’d argue that shooting for an above-average figure could make a lot of sense. Indeed, there’s a big difference between the average figure at 40 years of age and the median figure.
Whether or not you’re ahead of the curve, though, I’d say that, if possible, one should aim to get the most of their TFSAs by trying to make the maximum allowable annual contribution and using the proceeds to invest wisely in high-quality businesses that trade at a multiple that’s relatively easy to get behind.
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Keeping tabs on other Canadian contributors
At the end of the day, building your TFSA or RRSP nest egg isn’t just about doing better than others around you. It’s more about staying on top of contributions and making sure you invest, rather than letting proceeds sit and collect interest that’s probably far less than the current rate of inflation. If you contribute regularly and invest in great companies, my guess is that you might be surprised by how far ahead of the average for your age you are.
As for the average TFSA and RRSP balance at the age of 40, it’s a fairly broad range. For the TFSA, it’s in the $20,000 to $33,000 ballpark. But what’s most striking is the median number, which is just $12,000. In my opinion, that’s way too low, especially given how much space has opened up for the average 40-year-old, who would have been of age when the TFSA came to be.
For the RRSP, the average figure is between $49,000 to $89,000, with a median lying in the $30,000 range. Again, the median is quite low. Though, I’m more shocked by the even lower TFSA figure.
Again, as an investor, I’d aim not to be average or closer to that median. Instead, I’d look to optimize and stay comfortably ahead of other older Millennials. Given where inflation is at (it’s loftier) and how stagnant wages have become, as well as the potential impact of AI on employment (could it cause a recession?), I’d argue that it’s only going to get harder to save up in a TFSA, RRSP, or elsewhere.
Contributing and investing can put you well ahead of the average!
In any case, contributing is one thing. Investing is another thing entirely. If you’re not both contributing and investing in higher-return securities, like stocks, you’re not going to be on that optimal compounding track. If inflation is weighing and wages are stuck, it’s more than forgivable to delay a contribution or even make the drawdown (be careful of taxation when withdrawing from an RRSP), but, at the end of the day, investing in great firms, like Enbridge (TSX: ENB), is key to doing well over time.
Personally, I think Enbridge ought to be a staple in one’s RRSP or TFSA. It’s a steady dividend grower, with a generous yield (4.9%), strong managers, and a fairly predictable (and growthy) cash flow stream. Add the impressive capital gains posted in recent years into the mix, and you’ve got what could be the perfect go-to stock for investors looking for a name that can really help supercharge one’s wealth-creation potential.
