Not everyone likes to think about what they’ll be doing when they retire at the start of their careers. However, those turning 45 years old might start looking at things differently. Retirement planning goes from being something they’ll do some other day to becoming an important factor in financial decisions they make.
With the typical retirement age in Canada at 65, 45-year-olds have roughly two decades to check their savings, compare with other Canadians their age, and figure out how to cover the gaps and make the most of their retirement plan. Data from the Canada Revenue Agency and Statistics Canada shows that Canadians are significantly underutilizing their retirement accounts, with many ignoring one for the other.
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The RRSP is more dominant
According to various reports, Canadians in the 45-to-54 age group have far more money in their Registered Retirement Savings Plan (RRSP) accounts than in their Tax-Free Savings Accounts (TFSAs). While the average RRSP balance for Canadians is around $150,300, the median of $70,000 gives a more honest picture. Due to high earners, the average RRSP balance shoots up significantly higher than what the median indicates. If your RRSP is closer to $70,000, you’re in line with most Canadians your age.
The RRSP and TFSA both offer tax benefits to investors. The RRSP has been around for longer, and Canadians are more familiar with it. When you contribute to an RRSP, it reduces your taxable income right away. Employer matching programs provide RRSPs with another boost that speeds up wealth growth.
However, the TFSA also offers excellent tax breaks. When you invest in a TFSA, you contribute with after-tax dollars. While there’s no upfront tax savings, the tax-sheltered status of the account adds up to a lot in tax savings over the years. Since you have already paid taxes on the contributed amount, returns from your TFSA holdings can grow your account balance without incurring any taxes for life.
Since withdrawals are tax-free, many Canadians treat the TFSA as a glorified savings vehicle to fund purchases or emergencies rather than a long-term investment vehicle to build a retirement nest egg.
Investing in high-quality stocks
As of 2026, the cumulative TFSA contribution room is at $109,000. If your TFSA balance is lower than you would like, one of the best fixes is to increase contributions while gaining exposure to high-quality dividend stocks like Royal Bank of Canada (TSX: RY), which can be a good strategy. Over the last two decades, the Canadian dividend stock has returned over 1,200% to investors after adjusting for inflation.
The $410.4 billion market-cap TSX bank stock is the largest among Canada’s Big Six Banks and the largest stock by market capitalization on the TSX. Its historical performance over the years has made it a staple in many investment portfolios. It has a reliable track record of paying investors their quarterly dividends through all market cycles.
RBC has a diversified earnings base, offers consistent dividend growth, and is well-capitalized. It can be an excellent stock to buy and hold for the long run.
Foolish takeaway
With roughly 20 years to go before you retire, you might not think you have a lot of time to build a nest egg. However, two decades of compounded growth can give you plenty of returns to fund a comfortable retirement. The earlier you start prioritizing smart investments using your retirement accounts, the better. Blue-chip stocks like Royal Bank of Canada can be vital to help you achieve your retirement goals.
