3 TFSA Hacks to Build a $1 Million Tax-Free Nest Egg

A Tax-Free Savings Account (TFSA) is a powerful tool that can help you build a $1 million nest egg, which you do not report on income tax returns. Imagine having $1 million that will not affect your Old Age Security (OAS) pension and other government benefits. And yet, many millennials and Gen Zs are wasting this $1 million opportunity by using a TFSA only to hold the amount they need in the immediate future.

For instance, Mary invested $5,000 of her TFSA contribution in a term deposit that gives 3.5% annual interest. She withdraws this money to fund her annual vacation. This transaction is not using the tax benefit of the TFSA, as 3.5% interest income of $175 is not making a significant change in your tax liability.

TFSA hacks to build a $1 million tax-free nest egg

The TFSA is the best tool to invest in high-growth stocks for the long term, as it allows your investment to grow tax-free.

Invest in wealth generators

TFSA is ideal for the next Nvidia or Apple, which has made its loyal shareholders millionaires in 10–15 years. All those stocks you hear about turning $10,000 invested in 2015 into $1 million today are the best TFSA investments. Some of the wealth generators are trading near their 10-year lows, creating an opportunity to accumulate wealth from their future growth potential.

Constellation Software (TSX:CSU) stock has seen a sharp correction of more than 40% since July 2025. There has been a significant management change as founder Mark Leonard stepped down, and the fear of artificial intelligence‘s (AI) impact on traditional software companies remains unknown. Can AI disruption reduce the value of vertical-specific software companies?

This uncertainty is pulling down the price of the  Constellation Software share price. However, the company is watching the AI transition and experimenting with AI. It is not yet acquiring AI companies, waiting until they create a strong return on investment (ROI). The business model of Constellation is not to buy a cutting-edge technology at a steep price, but to acquire a proven and mature company with regular free cash flow at a discount.

Mark Miller, who has taken the role of chief executive officer (CEO), has to sustain the free cash flow growth for an entire year to gain investors’ trust. The company’s fundamentals and secular growth remain strong, making it the wealth generator that can help build your $1 million nest egg.

$10,000 invested in Constellation in January 2016 would have bought you 785 shares at $12.73 per share. These shares are worth $2.1 million today, even when the stock price is down more than 40%.

Rebalancing your TFSA portfolio

Finding the next wealth generator is not easy. However, another way to build on your $1 million nest egg is disciplined asset allocation. Suppose your target allocation is 40% growth stocks, 40% dividend stocks, 20% ETFs. Review your TFSA balance every six months and rebalance your portfolio in the target asset allocation.

For instance, you have $10,000 in your TFSA, and you invested $4,000 of your growth stock allocation in Shopify (TSX:SHOP) in June 2025. It is now $5,373. Assuming that the rest of your portfolio remains unchanged, Shopify now accounts for 53% of your TFSA portfolio. You can sell shares worth $1,300 and reinvest them in a dividend stock that is near its low.

This timely booking of profits helps you preserve the capital gains and convert them into dividend income. Rebalancing your portfolio will help you earn even in a market downturn.

Compound your returns with high-growth opportunities

The Canada Revenue Agency (CRA) has certain qualified TFSA investments, which include ETFs and stocks trading on publicly-listed exchanges, like the NASDAQ, TSX, and NYSE. Bitcoin is not a qualified TFSA investment, but you can invest in a bitcoin mining company, Hive Digital Technologies. Hive offers two growth cycle opportunities: bitcoin mining and AI.

You can consider buying this stock at $4 or lower and selling it at $8 and above. Whenever there is a cyclical upturn, you can withdraw your gains and reinvest in resilient growth stocks.

The post 3 TFSA Hacks to Build a $1 Million Tax-Free Nest Egg appeared first on The Motley Fool Canada.

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More reading

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• If You Want a Million-Dollar TFSA, You’ll Likely Need These Stocks In It

The Motley Fool has positions in and recommends Shopify. The Motley Fool recommends Apple, Constellation Software, and Nvidia. The Motley Fool has a disclosure policy. Fool contributor Puja Tayal has no position in any of the stocks mentioned.