This is clear from Statistics Canada data. A 2024 report breaking down TFSA use by age and gender found that for Canadians aged 40 to 44, the average fair market value of TFSA in 2022 was just $17,604. For millennials and older Gen X investors, that’s not great. If you’re even close to this range, there are a few good reasons why the TFSA deserves a higher priority.
Why a TFSA?
The TFSA is one of the most flexible investment accounts available to Canadians. The contribution limit increases most years and tends to increase with inflation over time. Any growth within the account is tax-free, and withdrawals are also tax-free. There are no income requirements to use it, and there are no penalties or restrictions on when you can withdraw money.
This flexibility sets it apart from other registered subscriptions. A Registered Retirement Savings Plan (RRSP) offers a tax deduction on contributions, but withdrawals are fully taxable and are often subject to withholding taxes. The First Home Savings Account (FHSA) is powerful if you’re buying a first home, but it’s specially designed and more restrictive. With a TFSA you can withdraw money at any time for any reason, and the amount you withdraw will be added back to your contribution room in a subsequent year.
The name can be misleading. Despite being called a “savings account,” simply holding cash in the long term is usually not ideal. The real power comes from holding investments that can grow over time or generate income without incurring taxes.
What you can buy in your TFSA at age 44
At the age of 44, assuming a retirement age of around 65, you still have twenty years or more to invest. That argues for a growth-oriented portfolio, but not necessarily an all-equity approach like a younger investor might use. An option that fits this middle ground is iShares Core Growth ETF Portfolio (TSX:XGRO).
This is an all-in-one exchange-traded fund with asset allocation that holds approximately 80% in global equities and 20% in bonds. The equity portion is diversified across Canada, the United States, international developed markets and emerging markets, while the bond portion helps reduce volatility and slightly increases income.
XGRO is also very cost-efficient. The management expense ratio is 0.20%, meaning a $10,000 investment costs approximately $20 per year in fees. Compared to many bank mutual funds that still charge close to 1%, that difference widens significantly over time. The fund rebalances automatically, making it a simple set-it-and-forget-it option for TFSA investors in their 40s.
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