The Tax-Free Savings Account (TFSA) has been a cornerstone of financial planning in Canada since its introduction in 2009. Offering a way to accumulate wealth tax-free, it presents a vital opportunity for Canadians to secure a comfortable retirement.
The total amount you’re allowed to contribute to a TFSA – known as the contribution room – is currently $95,000, though yearly limits can affect how much of that you can invest at one time.
Understanding how the average balances of TFSAs compare across different age groups, with a special eye on this total contribution potential, can give you insight into your progress toward financial freedom.
TFSA Snapshot in 2024: The Averages
As of 2024, the average TFSA balance across Canadians is approximately $41,510. For people aged 55 and above, the average balance is higher at $70,000, reflecting years of consistent contributions and compounding growth.
For TFSA contributors aged 40 and over, average balances typically fall between $50,000 and $70,000.
TFSA Annual and Cumulative Contribution Room Limits
| Year | Annual Limit | Cumulative Limit |
| 2009 * | $5,000 | $5,000 |
| 2010 | $5,000 | $10,000 |
| 2011 | $5,000 | $15,000 |
| 2012 | $5,000 | $20,000 |
| 2013 | $5,500 | $25,500 |
| 2014 | $5,500 | $31,000 |
| 2015 | $10,000 | $41,000 |
| 2016 | $5,500 | $46,500 |
| 2017 | $5,500 | $52,000 |
| 2018 | $5,500 | $57,500 |
| 2019 | $6,000 | $63,500 |
| 2020 | $6,000 | $69,500 |
| 2021 | $6,000 | $75,500 |
| 2022 | $6,000 | $81,500 |
| 2023 | $6,500 | $88,000 |
| 2024 | $7,000 | $95,000 |
| * year of TFSA inception | ||
TFSA Growth Milestones by Age
Setting benchmarks for your TFSA can provide structure to your savings plan. Here’s a milestone framework, considering the total cumulative contribution room since TFSAs were created.
Age 30-35: Laying the Foundation
At this stage in your thirties, the focus should be on establishing consistent savings habits. Many young Canadians use their TFSAs for shorter-term goals, but those planning for retirement should prioritize investments with higher growth potential.
Average TFSA Balance Goal: $15,000 – $25,000
Strategies:
- Contribute as much of the annual limit as possible (currently $7,000 in 2024).
- Invest in diversified ETFs, mutual funds, or growth-focused stocks for long-term growth.
- Reinvest all dividends to harness the power of compounding.
Age 40: Building Momentum
By age 40, Canadians often have higher earnings and fewer short-term financial pressures, making it an ideal time to increase contributions. Regular TFSA contributors in their 40s generally have balances between $50,000 and $70,000.
Average TFSA Balance Goal: $50,000
Strategies:
- Reassess your portfolio and balance growth investments with moderate risk assets.
- Use TFSAs to supplement other retirement savings, like RRSPs, while staying mindful of withdrawal rules.
- Avoid using TFSA funds for short-term needs to preserve growth for retirement.
Age 50: Closing the Gap
At the 50-year age milestone, retirement planning takes center stage. The average TFSA balance often reaches $70,000 or more, depending on individual contribution consistency and investment choices.
Average TFSA Balance Goal: $70,000 – $85,000
Strategies:
- Maximize your annual contributions to grow your savings tax-free.
- Consider reallocating investments to include a mix of stable income-generating assets (e.g., dividend-paying stocks or bonds).
- Plan for how TFSAs will complement your RRSP and CPP payouts in retirement.
Age 60: Preparing for Retirement
By age 60, many Canadians are nearing retirement. At this stage, TFSAs become a critical tool for generating tax-free income in retirement while preserving other benefits, such as Old Age Security (OAS).
Average TFSA Balance Goal: $85,000 – $95,000
Strategies:
- Shift your portfolio toward more conservative investments to preserve capital.
- Use TFSAs as a tax-efficient source for covering retirement expenses.
- Factor in anticipated withdrawals to ensure your savings last throughout retirement.
How to Optimize TFSA Contributions
Here are key strategies to help you fully harness the power of your TFSA:
- Contribute early and consistently: The sooner you start maximizing your TFSA contributions, the more time your investments have to grow. Contributing the maximum annual limit every year ensures you fully benefit from the tax-free growth potential.
- Utilize the full contribution room: Strive to take full advantage of the $95,000 (as of 2024) cumulative contribution space, adjusting your yearly savings goals accordingly.
- Preserve your contributions and avoid withdrawals: While TFSAs offer flexible withdrawals, treating this account as a long-term investment rather than an emergency fund ensures you don’t interrupt the compounding growth. Withdrawing from your TFSA reduces your balance and interrupts compounding growth. If withdrawals are necessary, aim to reinvest as soon as possible.
- Invest beyond savings: Look beyond traditional savings accounts; younger contributors can invest in stocks and ETFs inside their TFSA to maximize growth with more aggressive investments. For older contributors, more staid investments may make more sense.
- Automatic reinvestment: Opt for automatic reinvestment of dividends to compound your TFSA growth, pushing you toward and beyond your milestones.
- Periodic portfolio reviews: Adjust your investment choices as your financial situation and goals evolve, especially as retirement approaches.
A well-managed TFSA can be a cornerstone of your retirement plan, providing flexibility, tax savings, and long-term growth. While average TFSA balances vary across age groups, following milestones for ages 30, 40, 50, and 60 can help you stay on track.
By starting early, contributing regularly, and making informed investment choices, you can grow your TFSA to meet — and even exceed — these benchmarks, helping to ensure a financially secure retirement.