The Average TFSA Balance for Canadians at 50

Are you contributing enough to your Tax-Free Savings Account (TFSA)? The $35,235 average TFSA balance of Canadians in the 50-54 age group in 2024 might put you at ease. The average TFSA balance of those in the +50 age group is not even 50% of their $95,000 cumulative contribution room. It doesn’t mean that they haven’t been contributing. But they have also been withdrawing from the TFSA.

What should be your TFSA focus at age 50?

With just 10-15 years left to earn active income before you retire, it is time to build a sizeable TFSA portfolio which can compound even during retirement. Unlike a Registered Retirement Savings Plan (RRSP), which ends at age 70, a TFSA continues till your death. You can keep contributing till your last breath and pass it on to your spouse tax-free by naming them as successors in your TFSA.

At 50, retirement takes priority over other goals. Maxing out your TFSA contributions can get you started on wealth creation. Once the amount is inside the TFSA, the CRA won’t bother you as long as you invest in publicly listed securities on well-known exchanges and do not trade.

Trading and investing are poles apart. Trading involves the constant buying and selling of shares, wherein you may not hold shares or hold them for a few days or weeks. Investing is when you buy a stock, hold it for several months or years, and later sell it.

Within the TFSA, build a core and satellite portfolio. The core portfolio is where 80% of your contribution will go, and you won’t withdraw from it. The remaining 20% will be the satellite portfolio, which you can use for emergencies and other needs. All TFSA withdrawals can be limited to this portfolio.

TFSA stocks for core portfolio

Within the core portfolio, invest in growth stocks and exchange-traded funds (ETFs) that can give you 15-20% annual returns at a minimum. Even a defensive stock like Loblaw (TSX: L) gave 20% average annual returns in the last five years. Past returns do not determine future returns, but can be used to analyze how the stock reacts to certain economic conditions.

Loblaw is a superstore, pharmacy, bank, and apparel retailer in Canada. Its performance is directly linked to consumer spending and economic growth. The stock has a defensive nature; it remains flat in a bear market and grows in a bull market. But in the long term, it grows, making it an ideal stock for a core portfolio. Shopify and Descartes Systems are other good stocks for growth in your core portfolio.

Within the core portfolio, you can determine a 60:40 or 70:30 ratio for growth and dividend stocks. When your growth stocks give strong returns, you can sell some stocks and reinvest that profit in high-yield dividend stocks. TFSA contribution from your working income is best used in growth stocks, and profits booked from here can be moved to passive income.

TFSA stocks for satellite portfolio

Now, in the satellite portfolio, allocate 20% of your TFSA contribution here. You can use this money to withdraw or invest in high-risk stocks like Ballard Power Systems, which can grow your money threefold in a few months, or fall if risks are realized. If profits are realized, you can treat yourself by withdrawing the profits. That way, you can reap the returns while building a sizeable TFSA balance.

Investors, take note

A little planning and discipline can turn around your finances. A TFSA’s tax-free investment growth and tax-free withdrawals can enhance your investments and make a tax-free million-dollar portfolio a reality in 15-20 years.

The rebalancing can continue even after retirement. At 50, you still have time on your side to make long-term investing work for you.