Turning 55 is a major milestone for investors. On one hand, retirement is now about a decade out, which can be an exciting thought. On the other hand, that remaining decade can also be a source of stress, especially when considering the average Tax-Free Savings Account (TFSA) balance for Canadians at 55.
Fortunately, investors with smaller balances still have plenty of time to contribute, reinvest dividends and let compounding work. To help meet that goal and strengthen their TFSA, investors should focus on investments that can support long-term compounding.
Here are three options for investors to consider owning today.
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Build income with Enbridge stock
Enbridge (TSX: ENB) is one of the largest energy infrastructure companies on the planet. The company operates an extensive network of assets that includes pipelines, natural gas utilities, storage facilities and a growing renewable energy portfolio.
Those assets are mainly regulated, generating a recurring and stable source of revenue. This allows Enbridge to invest in growth initiatives and grow its quarterly dividend. More importantly, because those assets are regulated with contracted cash flows, Enbridge’s results aren’t affected by the volatile price of oil.
Turning to income, Enbridge has paid dividends for seven decades. The company has also offered annual increases to that payout for over three decades. The latest increase was a 3% bump that was paid this year, and the company offers a yield of 4.96%.
This makes the stock an ideal option for those investors seeking to boost their average TFSA balance.
Add some diversification with this ETF
Exchange-traded funds (ETFs) are great options for investors looking to diversify beyond individual stocks. iShares S&P/TSX 60 Index ETF (TSX: XIU) offers investors that diversified appeal along with some income-producing potential.
The fund tracks the S&P/TSX 60 Index, providing exposure to 60 of Canada’s largest publicly traded companies. That includes a broad slice of the economy, including the major banks, energy producers, railways, utilities, and other businesses.
The diversification that the ETF offers is a major advantage for long-term investors. Rather than depending on one company, investors are purchasing an entire basket of leading Canadian stocks.
This reduces company-specific risk while still providing quarterly distributions. As of the time of writing, the fund also offers investors a yield of 2.17%.
Consider Bank of Nova Scotia for income and growth
A third option for investors looking to boost their average TFSA balance is Bank of Nova Scotia (TSX: BNS). Scotiabank is one of Canada’s big bank stocks, and offers another source of dividend income, along with growth potential.
That growth potential stems from Scotiabank’s international segment. In recent years, the bank has shifted focus from more volatile developing markets in Latin America to mature markets in the U.S. and Mexico.
Turning to income, Scotiabank has paid dividends without fail for nearly two centuries. As of the time of writing, the bank offers a quarterly dividend that carries a yield of 3.72%.
The bank has also provided annual upticks to that dividend for over a decade.
The average TFSA balance for Canadians at 55
According to the latest data from Canada Revenue Agency, Canadians between the ages of 55 and 59 had an average TFSA value of just over $43,000. Those between 50 and 54 averaged approximately $35,000.
Since the TFSA was launched back in 2009, a cumulative $109,000 in contribution room has become available to investors who were eligible to contribute in 2009.
That full contribution applies to investors 55 years of age, who would have been under 40 years old in 2009.
This means that investors who have TFSA balances lower than the average mentioned above still have a decade to act, and potentially thousands to contribute.
In my opinion, one or all of the investments mentioned above are great long-term options to add to any larger, well-diversified portfolio.
Buy them, hold them, and watch your TFSA balance grow.
