It’s normal to wonder because – let’s face it – you’re quickly approaching retirement age. Decades ago, it was very common for people to retire at age 61. With inflation taking a bite out of people’s savings, it has become more common to retire in your mid-60s and then continue working part-time.
Having a well-funded TFSA is a good way to avoid having to work in your late 60s, 70s or beyond. In your mid-fifties, so close to the finish line, the decisions you make now will be crucial to retiring in good shape. With that in mind, here is the average TFSA balance at age 54 in Canada, along with some tips on how to maximize yours.
About $23,300
According to 2022 StatCan data, Canadians aged 50 to 54 had $20,000 to $23,300 in savings that year. The TFSA balance typically increases over a person’s working life, so 54-year-old Canadians likely had an average of $23,300 in 2022 – the highest amount.
Since 2022, both the Canadian and US markets have been bullish and Canadians have continued to save money. So the WHERE The average TFSA balance for 54-year-old Canadians is likely higher than that of 2022. Still, the most recent hard data we have is from that year, so $23,300 is the figure I’m going for. As the current average is higher than that it is unlikely to be the case to any great extent as saving and investing are often slow processes.
What this means
If you are 54 years old and your TFSA balance was $23,300 or higher in 2022, you were average to above average that year. If you currently have that much in your TFSA, chances are this is the case slightly below average. Either way, the real takeaway here is that the average TFSA balance in Canada – certainly in 2022 and probably today – isn’t nearly enough to retire on. Canadians usually have some RRSP money in addition to TFSAs, but most Canadians’ RRSPs are also inadequate to fund their retirement, averaging between $48,400 and $98,400. Until there are several hundred thousand, perhaps a million, spread across RRSPs and TFSAs, there is work to be done.
How to Maximize Your TFSA Balance
After examining the average TFSA balance at age 54 in Canada, our next logical topic is: “How to Maximize Your TFSA Balance.” As we’ve seen, most Canadians don’t have nearly enough in their TFSAs to enjoy, even at age 54, with the finish line fast approaching. So it’s worth exploring how you can increase your TFSA balance so you have more than you need when you turn 65.
One of the best ways to grow your TFSA balance – aside from the obvious ones like ‘save more money’ – is to invest in index funds. Index funds are pooled investment vehicles that trade on the stock market. They hold diversified portfolios and charge very low fees. They outperform 90% of active investors in the long term.
If you’re Canadian, it’s a great index fund to start with iShares S&P/TSX Capped Composite Index Fund (TSX:XIC). XIC is a highly diversified broad market index fund with very low costs: a management fee of 0.05% and a management expense ratio of 0.06% (MER, or all fund costs together). The fund follows the S&P/TSX composite indexa highly diversified index based on 240 shares. XIC actually owns 220 out of 240, meaning it is faithfully tracking its benchmark. It has a dividend yield of 2.3% – higher than the S&P 500. Finally, the fund is highly liquid and widely traded, resulting in low spread costs. Overall, it’s a great fund to keep in your TFSA while you wait for the magic of compounding to pave your way to a rich retirement.
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