Millennials: You Could Realistically Retire a TFSA Multi-Millionaire

Millennials don’t need to take extreme risks, and they don’t need to live frugally to secure a multi-million-dollar TFSA! All they need are TFSA titans like BMO Vow Volatility Canadian Equity ETF (TSX:ZLB) and a disciplined, long-term horizon!

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

I’m sure you’ve heard of the personal finance pieces aimed at millennials that urge them to stop spending on $5 lattés or $10 avocado toast and to use the proceeds instead to save or invest.

My goal isn’t to encourage you to cut these daily comforts or conveniences out of your life to fund your future. I don’t know how much utility (the economic measure of satisfaction or happiness) a $5 latté gives you; nobody knows if the trade-off is worth it but you! Millennials have decided that the marginal utility from buying these goods is higher than the seemingly steep price paid for artisanal coffee, so nobody can argue with that. If you’re a millennial, keep buying those lattés and avocado toast if your financial situation allows for it and they bring you joy.

If you’re like the many non-indebted millennials who aren’t buying homes or starting families, however, then odds are, you’ve got more than enough to make the maximum contribution of $5,500 into your TFSA. Just $5,500 per year is all you’ll need to finance an early retirement, so you don’t need to put the brakes on your discretionary spending if it brings you joy.

I’m sure you’ve heard of the FIRE (financial independence, retire early) movement that many millennials have embraced of late. While homeownership may be out of the equation (for now), there are other, arguably better ways to invest your capital in improving the quality of your life given the seemingly unfavourable environment that millennials are in.

Instead of home ownership, many millennials have decided (or been forced) to rent in the burbs, using a remainder of their budget towards investing in a TFSA early retirement account and using the proceeds to buy one-stop-shop investments like BMO Low Volatility Canadian Equity ETF (TSX:ZLB), which are more conservative, yet more than enough to secure a safe, wealthy, and early retirement over the course of many years.

How could such a seemingly simple low-beta ETF like ZLB punch your ticket to a multi-million-dollar TFSA?

You’re probably aware that the TFSA is a must-use tool, as the power of tax-free compounding is remarkably profound when given enough time to work its magic. Many millennials may underestimate its power, but here’s why it’s of utmost importance, as even the most boring of investments, like ZLB, can grow a TFSA to a jaw-dropping amount that’s sheltered from the tax man.

Let’s do the math.

Now, I’m going to assume that you’ve made the contribution every year and haven’t spent a penny of it, bringing your TFSA value to $57,500 as of this year. That’s a conservative assumption, especially when you consider that prudent investors have had well over a decade to invest compound through various investment instruments. Some younger millennials may not have had the opportunity to make the full contribution amount, and some older millennials may have invested in ZLB such that their TFSAs are now swelled, so let’s stick with $57,500 for example’s sake.

Now under the conservative assumption that the contribution amount remains at $5,500 over the course of decades (it’s more than likely to be raised substantially over time), and assuming you make the maximum contribution every single year, (re)investing all proceeds into ZLB, let’s just see how much you’d have!

ZLB has scored an above-average annualized return of 13.56% since the fund’s inception, which is applaud-worthy, but not a conservative assumption to make over the decades that lie ahead. A few recessions are bound to be thrown in, so let’s say ZLB will have a net return 9% per year, distributions included, after all management and admin expenses.

You’d have a textbook time-value-of-money problem on your hands — a present value of $57,500 to go with $5,500 contributions per year at a return of 9%.

Over the next 10 years, 20, 30, and 40 years, your TFSA would have swollen to around $220,000, $604,000, $1,500,000, and $3,700,000, respectively.

These are conservative estimates too!

Most millennials who stick with the basics will hit the magic $2 million milestone after 33 years, officially labeling most millennials as TFSA multi-millionaires well before their 65th birthdays.

Talk about retiring in style, without the frugal living or taking on excessive amounts of investment risk.

That’s the power of compounding. Just $5,500 per year is all it takes, so enjoy that avocado toast!

Stay hungry. Stay Foolish.

Should you invest $1,000 in Bmo Low Volatility Canadian Equity Etf right now?

Before you buy stock in Bmo Low Volatility Canadian Equity Etf, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Bmo Low Volatility Canadian Equity Etf wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joey Frenette owns shares of BMO Low Volatility CAD Equity ETF.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Stocks for Beginners

oil pump jack under night sky
Dividend Stocks

Here’s How Many Shares of TRP Stock to Own for $5,000 in Dividends, Even if Energy Prices Swing

Want major income, even if energy prices fluctuate, this could be a strong investment.

Read more »

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

How I’d Invest $50,000 of TFSA Cash as Canada-US Trade Uncertainty Grows

If you're looking to avoid volatility and still make gains in your TFSA, here's a low-volatility way to do it.

Read more »

Concept of multiple streams of income
Dividend Stocks

Why I’d Consider These 5 Essential Canadian Dividend Stocks for a Robust Income Portfolio

These dividend stocks are critical pieces of the Canadian economy and would serve a long-term income portfolio well.

Read more »

money goes up and down in balance
Dividend Stocks

Invest $25,000 in These Dividend Stocks to Combat Currency Fluctations

These dividend stocks could turn a $25,000 investment into a huge income stream – and help battle ongoing volatility.

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Stocks for Beginners

2 All-Weather TSX Stocks You Can Buy Anytime

Are you putting your investments on the back burner due to market uncertainties? Consider investing in these all-weather stocks.

Read more »

stocks climbing green bull market
Dividend Stocks

A 9% Dividend Stock Paying Cash Every Month, and Perfect in a Volatile Market

It's a volatile time, but this dividend stock can help you through it.

Read more »

top TSX stocks to buy
Stocks for Beginners

Top Stocks to Build Your Eventual Million-Dollar Portfolio 

The time is now to build an eventual million-dollar portfolio, as some lucrative growth stocks are trading at a Black…

Read more »

Data center servers IT workers
Dividend Stocks

1 Magnificent Canadian Stock Down 44% as AI Investing Heats up

This Canadian stock not only has growth, but in one of the best growth areas right now.

Read more »