Turning 55 changes how people think about money, given that retirement is on the horizon. It is also the point at which many Canadians finish paying off major expenses, like mortgages, freeing up cash that can finally go toward long-term savings.
That makes the Tax-Free Savings Account (TFSA) one of the most useful tools available for future Canadian retirees.
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The average TFSA balance at age 55
According to the latest CRA data, the average TFSA balance for Canadians between 55 and 59 is $43,519. However, the average unused contribution room for that same age group is $57,618. In other words, the typical 55-year-old still has more unused space in their TFSA than in their total invested capital.
For anyone who has been eligible to contribute to a TFSA since the account launched in 2009, the lifetime limit now stands at $109,000. Most people in this age bracket are using less than half of it.
Several Canadian residents use the TFSA as a savings account. It means the invested TFSA capital is held in low-interest-bearing instruments, such as guaranteed investment certificates (GICs). While GICs are ideal for the short-term investor, the instrument struggles to outpace inflation over time.
Moreover, Canadians tend to prioritize RRSP (Registered Retirement Savings Plan) contributions because they significantly lower the tax bill.
Alternatively, withdrawals from a TFSA are entirely tax-free, and unlike RRSP withdrawals, they will not trigger a clawback on Old Age Security payments in later years.
Own quality dividend stocks in the TFSA
If your TFSA balance is close to the $43,519 average and you are around 55, you likely still have 10 to 15 years before you retire. It is enough time to change the trajectory of this popular registered account, but only if that unused room gets put to work soon.
One of the more effective ways to do that is to shift some of that idle cash into quality, dividend-paying stocks such as Bank of Montreal (TSX: BMO).
In the fiscal second quarter (Q2) of 2026 (ended in April), BMO grew adjusted earnings per share by 40% year over year, while return on equity improved by 370 basis points to 13.5%.
Management also confirmed a 5% dividend increase to $1.71 per share and repurchased six million shares during the quarter.
At the bank’s Investor Day in March, CEO Darryl White laid out a clear plan to improve the return on equity to 15% by the end of fiscal 2027, driven largely by improving profitability in the bank’s U.S. operations and continued strength in Wealth Management and Capital Markets.
The plan appears to be tracking well so far, with U.S. Banking return on equity up 220 basis points year over year and commercial loan growth accelerating on both sides of the border.
In my view, this combination of a well-capitalized balance sheet, a long dividend history and a credible path to higher returns makes BMO an attractive candidate for investors looking to put unused TFSA room to work.
A $10,000 investment in BMO stock in July 2006 would be worth close to $80,000 today, after adjusting for dividend reinvestments. Despite its outsized returns, the TSX bank stock offers a dividend yield of almost 3% in July 2026.
When you hold a dividend stock like BMO inside your TFSA, every payout arrives completely tax-free. Set up a dividend-reinvestment plan, and those quarterly payments automatically buy more shares, which enhances the yield-at-cost significantly.
Over 10 years, that compounding effect can meaningfully change the size of your nest egg. An average balance of $43,519 at age 55 is a starting point.
But with tens of thousands of dollars in unused contribution room still available, the real opportunity lies in putting that space to work through quality dividend growers rather than letting it sit idle in cash.
