Invest in These TFSA Stocks Now and Retire with Peace of Mind

Are you looking to invest during retirement without the worry? These two top stocks in a TFSA can be your ticket to financial freedom.

| More on:

Tax-Free Savings Accounts (TFSAs) are like a secret weapon for Canadian investors, offering a fantastic opportunity to grow your savings without the pesky tax bite! With the annual contribution limit set at $7,000 for 2024, investors can sock away some serious cash. According to the Canada Revenue Agency, Canadians held over $426 billion in TFSAs as of 2023, and those who invest within this account can enjoy compound growth, making their money snowball over time. So, how can investors take full advantage?

Retirement growth

TFSAs are like the golden ticket for your retirement planning. One of the biggest advantages is the tax-free growth they offer. As of 2024, if you consistently max out your TFSA contributions for 30 years, investing in a balanced portfolio with an average annual return of 6%, you could potentially amass around $700,000 by retirement — all without paying a dime in taxes!

Plus, TFSAs provide incredible flexibility. Thereby making them an ideal choice for retirement savings. Unlike Registered Retirement Savings Plans (RRSPs), which have tax implications upon withdrawal, TFSAs allow you to access your funds tax-free whenever you need them. By leveraging the power of a TFSA, you can enjoy a comfortable retirement without the stress of tax bills looming over your hard-earned savings!

Stocks to consider

When it comes to TFSA stocks that retirees should consider, dividend-paying stocks are often at the top of the list. These stocks provide a steady stream of income, which can be particularly helpful when you’re living on a fixed retirement budget. Companies that have a history of paying dividends but also often increase their payouts over time are your best bet. This means you can enjoy the benefits of regular income while potentially seeing your investment grow.

Another smart strategy for retirees is to consider defensive stocks. Think utilities, consumer staples, and healthcare stocks. These provide essential services that people continue to use regardless of the economy’s state. By diversifying your TFSA with a mix of dividend payers and defensive stocks, you can create a balanced portfolio that not only generates income but also offers stability during those inevitable market ups and downs.

Consider two options

Canadian Utilities (TSX:CU) and Loblaw (TSX:L) are both standout options for retirees looking to invest in the TSX. Each brings unique strengths to the table. Canadian Utilities, with a market cap of around $9.71 billion, boasts a reliable dividend yield of about 5.07% at writing. Thus making it an attractive choice for income-seeking investors. The utility company has a long-standing history of providing essential services. This gives it a stable revenue stream even during economic downturns. With a solid profit margin of 16.43% and a price-to-earnings (P/E) ratio of 18.06, Canadian Utilities combines financial stability with the promise of growth, therefore helping retirees enjoy a reliable income without worrying too much about market fluctuations.

However, Loblaw, a major player in the grocery sector, has demonstrated impressive growth potential with a 56.16% change over the past year. With a market cap of $55.11 billion and a forward annual dividend yield of 1.14%, it offers a consistent return for investors while delivering essential goods that people rely on every day. Loblaw’s solid revenue of $60.32 billion and effective management, reflected in a return on equity of 19.22%, make it a robust choice for those looking to balance growth and income in their retirement portfolio. By investing in these two strong companies, retirees can enjoy the peace of mind that comes from stable dividends and the potential for capital appreciation!

Foolish takeaway

Investing in a TFSA is a savvy way for retirees to grow their savings without the tax burden, especially when they focus on dividend-paying and defensive stocks. Companies like Canadian Utilities and Loblaw shine on the TSX, offering reliable dividends and stability during economic ups and downs. Canadian Utilities provides a solid 5.07% dividend yield with a history of essential services, while Loblaw has seen impressive growth, boasting a 56.16% change over the past year and a dependable dividend. The key takeaway? By leveraging TFSAs and investing in strong companies, retirees can enjoy a steady income stream and potential capital appreciation, thereby making their golden years even brighter!

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 Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Dividend Stocks

analyze data
Dividend Stocks

Here’s Why the Average TFSA for Canadians Aged 41 Isn’t Enough

The average TFSA simply isn't enough for most Canadians in their early 40s. Here's how to catch up.

Read more »

cloud computing
Dividend Stocks

Insurance Showdown: Better Buy, Great-West Life or Manulife Stock?

GWO stock and MFC stock are two of the top names in insurance, but which holds the better outlook?

Read more »

concept of real estate evaluation
Dividend Stocks

How to Earn a TFSA Paycheque Every Month and Pay No Taxes on It

Canadian REITs can turn your TFSA into a monthly paycheque machine for life. Here's how Morguard North American Residential REIT…

Read more »

A plant grows from coins.
Dividend Stocks

The Smartest Dividend-Growth Stocks to Buy With $1,000 Right Now

New dividend-growth investors should consider CN Rail (TSX:CNR) stock and another top play if they're looking to build wealth over…

Read more »

Dividend Stocks

The 3 Top Canadian Stocks to Buy With $1,000 Right Now

If you want consistent income, look to consistent dividend payers. These three stocks are some of the best in the…

Read more »

A worker gives a business presentation.
Dividend Stocks

Want a 6% Average Yield? 3 TSX Stocks to Buy Today

These stocks pay good dividends that should continue to grow.

Read more »

chart reflected in eyeglass lenses
Dividend Stocks

Is Alimentation Couche-Tard Stock a Buy for its 0.9% Dividend Yield?

Couche-Tard stock's small yield is not enticing, but its growth potential could be a wealth creator.

Read more »

Hourglass and stock price chart
Dividend Stocks

5.2% Dividend Yield! I’m Buying This TSX Stock and Holding for Decades!

With its 5.2% dividend yield, Toronto-Dominion Bank (TSX:TD) is a stock I'm eagerly buying.

Read more »