The Tax-Free Savings Account (TFSA) is one of the best long-term wealth-building tools available to Canadians. But despite its appeal, there are some moves that TFSA users should make before the year ends.
Here’s a look at three of those moves to make before the year ends.
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Move #1: Check your TFSA contribution room
Before adding money to your account, TFSA users should confirm exactly how much contribution room they still have available. For 2026, the annual contribution limit is $7,000, plus any unused room carried forward and withdrawals made last year.
For investors, that means checking the contribution limit of each TFSA. The CRA provides one annual limit for the year that is applied across all TFSAs.
A similar check is needed when it comes to withdrawals. Money that is withdrawn in December this year becomes added contribution room when the calendar flips over to January 2027. By that same measure, a withdrawal made in January of next year won’t restore that room until the following year in 2028.
Investors with confirmed contribution room and money to invest should consider a long-term option such as iShares Core S&P/TSX Capped Composite Index ETF (TSX: XIC). The ETF offers an easy way to invest in a broad section of the Canadian market.
That includes exposure to some of the biggest names in the financial, materials, industrial, energy and telecom sectors, to name just a few.
Even better, it offers investors a way to generate some income, too. The fund offers a distribution that pays out a yield of 2% as of the time of writing.
This makes the fund an ideal choice for TFSA users who don’t want to pick individual winners.
Move #2: Put long-term TFSA cash to work
Knowing that you have available contribution room is only part of the review that TFSA users should be doing. Investors should also confirm whether the cash inside their TFSA still serves its intended purpose.
Cash earning little or no interest can limit long-term growth. If existing positions in a TFSA are paying dividends that aren’t being put to work, either as new investments or reinvested back into the account, it can be a missed opportunity.
That’s where the appeal of a fund like iShares S&P/TSX Composite High Dividend Index ETF (TSX: XEI) comes into play. This fund tracks a Canadian high-dividend index and provides investors with a monthly distribution.
Again, it doesn’t require picking individual winners, but it does pay a respectable 3.5% yield as of the time of writing.
By way of example, consider a $15,000 allocation in XEI. Given the current payout, that initial investment will generate an income of just over $44 every month. That’s not enough to retire on, but that is enough to generate a new share each month from reinvestments alone.
Move #3: Diversify beyond Canada
The TFSA is a great investment vehicle, but so far the investments have focused on the Canadian market. Diversifying a portfolio with some U.S. and international holdings can provide additional growth potential.
An example of that to consider is iShares Core MSCI All Country World ex Canada Index ETF (TSX: XAW). The fund provides exposure to developed and emerging international markets.
This means that the fund can offer a way for TFSA users to invest beyond the Canadian market. Like the other investments mentioned above, XAW does offer investors a distribution, but the yield only works out to 1.2%.
TFSA users can finish the year with a clearer plan
A year-end TFSA review doesn’t need to be a major overhaul of the entire portfolio. What it should be is a review that ensures uninvested cash has a purpose, investments are diversified, and that no additional contributions are sitting idle.
The three funds mentioned above can help with those moves.
Buy with a long-term plan and give your TFSA time to grow.
