A Tax-Free Savings Account (TFSA) paycheque doesn’t have to replace your salary to earn its place in a retirement plan. Covering groceries, utilities, or a few favourite subscriptions is a perfectly respectable start. A $300 monthly target means finding $3,600 a year, which usually takes a five-figure balance with a fairly substantial first digit. I’d build around sustainable payments, not a yield that promises to shrink the shopping list overnight. So let’s look at a stock that could get you there.
Source: Getty Images
Start with the income target
The capital needed depends on the portfolio’s yield, meaning annual income divided by its current value. At 4%, the target needs $90,000. At 5%, it needs $72,000. At 6%, it needs $60,000. The smaller balance is tempting, but the higher yield may bring more exposure to dividend cuts, debt, or an industry facing trouble.
The Canada Revenue Agency says investment income and withdrawals from a TFSA are generally tax-free. That lets you spend the cash without adding it to taxable income, and TFSA income doesn’t reduce federal income-tested benefits such as Old Age Security (OAS). You still need enough personal contribution room for the amount deposited. Unused room carries forward, while withdrawals generally return as room the next calendar year.
A monthly payer makes it tangible
Choice Properties (TSX: CHP.UN) offers a useful example because it pays monthly and owns Canadian retail, industrial, and other property. Its grocery-focused rental base gives the income a practical foundation. People can skip a shopping spree more easily than a grocery run, which helps explain the appeal of a landlord with necessity-based tenants.
Its distribution is $0.065 per unit monthly, or $0.78 annualized. Using the recent share price of $14.92, buying 4,616 whole units would produce just over $300 a month. Here’s the actual investment required before fees, assuming the payment stays at its current rate.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | ANNUAL DIVIDEND | ANNUAL TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| CHP.UN | $14.92 | 4,616 | $0.78 | $3,600.48 | Monthly | $68,870.72 |
That’s $300.04 arriving each month, with no units sold. It’s a working example of the target, although I wouldn’t put the entire income account into one landlord. A finished plan could combine property with utilities, banks, and infrastructure, adjusting the capital requirement to the portfolio’s blended yield. Diversification may require a larger balance, which is a reasonable price for spreading the risk.
Build before you spend
While you’re accumulating, reinvesting payments buys more units and increases future income. You can reinvest dividends already earned inside the TFSA without using additional contribution room. New deposits still need available room. Keeping the distinction straight makes TFSA investing much easier, particularly when an account has grown well beyond the dollars originally contributed.
Choice’s second-quarter funds from operations (FFO) were $0.27 per unit. That’s an adjusted property-earnings measure, and it covered the quarter’s $0.20 distribution with money left over. I like that cushion more than an eye-catching yield. Interest costs and building maintenance still compete for cash, so coverage is a useful starting point alongside the other demands on cash.
The main concentration risk is Loblaw, which supplies more than half of Choice’s rent. A financially strong tenant can provide stability, but its decisions affect a large part of the business. I’d combine this holding with other Canadian dividend stocks and keep a cash reserve so an unexpected expense doesn’t force a sale after the market has fallen.
Bottom line
I’d aim for roughly $72,000 at a sustainable 5% portfolio yield, with the Choice example showing how a monthly payment works in practice. Start collecting the target only once the balance and diversification are in place. Until then, each reinvested distribution and affordable contribution moves more of tomorrow’s bills onto the investment account.
