Canadian retirees are searching for ways to get better returns on their savings to help offset the impact of inflation.
One popular investing strategy involves owning a combination of GICs and top TSX dividend growth stocks inside a self-directed Tax-Free Savings Account (TFSA).
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TFSA limit in 2026
The cumulative maximum TFSA contribution limit is $109,000 in 2026 for anyone who has qualified to make TFSA contributions every year since the launch of the TFSA in 2009. All interest, dividends, and capital gains earned inside a TFSA on qualifying investments are tax-free.
GIC pros and cons
Rates offered on Guaranteed Investment Certificates (GICs) have increased in 2026 in step with rising bond yields. At the time of writing, investors can get non-cashable GICs paying more than 4% from Canada Deposit Insurance Corporation (CDIC) members. This is comfortably above the current rate of inflation in Canada, so it makes sense to consider GICs for a TFSA portfolio today.
Money invested in a GIC is 100% safe as long as the GIC is offered by a CDIC member and the amount is within the $100,000 limit. This is comforting for investors who don’t want to put their invested capital at risk, but still want to get a decent return. On the downside, the best rates are offered on non-cashable GICs, so the funds are locked up for the duration of the certificate. In addition, rates on GICs are fixed for the term, so there is a risk of missing out on higher rates if funds are locked up for several years.
Dividend stock pros and cons
The TSX is home to many stocks with long track records of delivering steady dividend growth. Each time a dividend is increased, the yield on the initial investment rises. This helps investors build in some inflation protection into their savings. Stocks can also be sold at any time to access the investment funds in case there is an emergency cash requirement.
There is a trade-off, however, for this expected dividend growth and the potential capital gains. Stock prices can fall below the purchase price and dividends can be cut if a company runs into cash flow issues. Even top dividend-growth names can see their share prices pull back considerably over short periods of time.
Enbridge (TSX: ENB), for example, trades near $67 per share at the time of writing. This compares to $80 a few months ago, despite solid financial results and annual dividend hikes in each of the past 31 years.
Investors with a buy-and-hold strategy can take advantage of dips to pick up a higher dividend yield. Enbridge’s stock currently provides a yield of 5.8%.
Enbridge is working on a $38 billion capital program that is expected to drive steady growth in earnings and distributable cash flow over the medium term. Market conditions are favourable for energy infrastructure companies amid rising demand for oil and natural gas. Enbridge moves close to 30% of the oil produced in Canada and the United States and 20% of the natural gas used by American homes and businesses.
The bottom line
The right mix of GICs and dividend stocks depends on a person’s risk tolerance, need for access to the funds, and the required minimum yield.
In the current environment, it is quite easy to put together a diversified portfolio of GICs and top TSX dividend stocks to get an average yield of 4.3%. On a TFSA of $109,000 this would generate $4,632.50 per year in tax-free passive income. That works out to an average of about $386 per month.
