2 TFSA Habits That Work While Saving But Backfire in Retirement

These two common TFSA habits may become less effective once you enter retirement.

Key Points
  • A retirement TFSA can benefit from balancing current income needs with the need to keep wealth growing over time.
  • CN combines reliable quarterly dividends with cash flow growth, giving retirees an alternative to relying entirely on share sales for cash.
  • GWO has a 3% annualized dividend yield with growing earnings and an expanding retirement business, making it attractive for retirees who still want growth.

Thinking that your Tax-Free Savings Account (TFSA) strategy is evergreen and perfect for retirement is a bit like assuming the same pair of shoes will work for every part of your journey. While you’re earning a paycheque, you can afford to let your TFSA focus heavily on growth because you don’t need it to pay the grocery bill. Once that paycheque disappears, you’d want the account to behave differently.

Turning a retirement TFSA into an ultra-conservative portfolio may feel reassuring, but you could still need that money working for another 20 or 30 years. That means you might want to balance steady income with continued growth so you aren’t forced to sell investments too often. But unfortunately, some common TFSA habits could make achieving that balance more difficult.

Let me highlight two habits I’d reconsider in retirement and how some fundamentally solid Canadian stocks could help solve the problems they create.

senior man and woman stretch their legs on yoga mats outside

Source: Getty Images

Relying too heavily on capital gains

Chasing capital appreciation could work well when your retirement is years away, and you do not need portfolio income. After retirement, however, relying on selling shares to generate cash could make your portfolio more dependent on market fluctuations. And a quality stock like Canadian National Railway (TSX: CNR), or CN, shows how investors could keep pursuing growth without depending entirely on selling shares for cash.

CN operates a nearly 20,000-mile rail network connecting Canada’s eastern and western coasts with the U.S. Midwest and Gulf Coast. After gaining 27% over the last 12 months, its stock currently trades at $169.87 per share with a market cap of $102.2 billion. At this market price, it offers a 2.2% annualized dividend yield.

In the second quarter, CN’s revenue jumped 11% year-over-year (YoY) to about $4.8 billion, while its revenue ton-miles rose 5%, driven mainly by strong grain and energy volumes. As a result, the company’s net profit climbed 7% YoY to roughly $1.2 billion.

During the first half of 2026, CN also generated about $1.8 billion in free cash flow. That cash generation matters for a dividend-paying business as it gives the company flexibility to fund its operations, invest in its rail network, and return capital to shareholders.

Moreover, CN has room for further growth as it plans roughly $2.8 billion in capital investments this year alone. For retirees, that great combination of income and growth is what makes CNR attractive.

Becoming too conservative after years of saving

If the first mistake is depending too much on growth, the second is giving up on it altogether. And a stock like Great-West Lifeco (TSX: GWO) could help retirees avoid that extreme by pairing dividend income with rising earnings.

Simply put, this Winnipeg-based company provides retirement, wealth, workplace benefits, and solutions across Canada, the United States, and Europe. GWO stock trades at $91.42 per share with a market cap of roughly $81.5 billion. Despite its 68% gain over the last year, the stock still offers a 3% dividend yield.

Great-West’s second-quarter base earnings rose 11% YoY to nearly $1.3 billion. Its U.S. business has also been strong. This segment’s base earnings jumped 34% YoY in constant currency last quarter, helped by higher fee income from growing client assets, positive plan and wealth net inflows, and lower credit-related impacts.

Meanwhile, the company is also investing capital to accelerate its future growth. On September 2, Great-West’s subsidiary Empower completed its acquisition of Milliman’s retirement plan and benefits administration business. The deal added about 400 defined benefit plans and more than 1,100 defined contribution plans, representing roughly US$130 billion in combined client assets.

Retirees who become too defensive could still get a 3% dividend yield while maintaining exposure to a business growing earnings and expanding its retirement platform. In other words, retirement does not have to mean giving up on growth.

Fool contributor Jitendra Parashar has no position in any of the stocks mentioned. The Motley Fool recommends Canadian National Railway. The Motley Fool has a disclosure policy.

More on Dividend Stocks

happy woman throws cash
Dividend Stocks

The Ideal TFSA Stock: A 5.9% Yield-Paying Constant Cash

Enbridge’s predictable cash flows, substantial growth pipeline, and long history of dividend increases underpin its long-term investment appeal for TFSA…

Read more »

woman gazes forward out window to future
Dividend Stocks

Dividend Income in Retirement: What Could Go Wrong?

Dividend investing is a proven way to create income in retirement but you must know the risks you need to…

Read more »

The TFSA is a powerful savings vehicle for Canadians who are saving for retirement.
Dividend Stocks

A 5% Monthly Payer I’d Buy for My TFSA: About $100 a Month on $24,000

Canada’s largest residential landlord offers a high yield, reliable monthly income, and a tax-sheltered foundation for TFSA investors.

Read more »

Two seniors walk in the forest
Dividend Stocks

Can Dividends Replace a Paycheque in Retirement?

Can dividends in retirement replace your paycheque? Explore how Scotiabank, RioCan REIT, and Fortis can help build a steady retirement…

Read more »

Sliced pumpkin pie
Dividend Stocks

The Fees That Quietly Eat Into a Small Investment

Many funds charge outrageous fees, but broad market index funds like the iShares S&P/TSX Capped Composite Index ETF (TSX:XIC) usually…

Read more »

dividends grow over time
Dividend Stocks

The U.S. Dollar is Rising Again: Here’s What VFV Investors Should Know

VFV investors receive both U.S. equity returns and currency translation.

Read more »

businessmen shake hands to close a deal
Dividend Stocks

A Canada-India Trade Deal Could Be Big for Infrastructure: Is WSP Stock a Buy?

India could require roughly US$840 billion of urban infrastructure investment over 15 years.

Read more »

woman considering the future
Dividend Stocks

How Much Would You Need to Invest to Earn $100 a Month in Dividends?

These two monthly-paying dividend stocks can boost your passive income in this uncertain macroeconomic environment.

Read more »