The Average TFSA Balance at 55 — and How to Improve Yours

According to the latest Statistics Canada data available in 2026 for the 2024 contribution year, Canadians aged 55 to 59 had an average Tax-Free Savings Account (TFSA) balance of $43,519. While that may seem respectable, another figure is even more revealing: average unused TFSA contribution room stood at $57,618.

That means many Canadians approaching retirement are not taking full advantage of one of the most powerful wealth-building tools available. Since investment gains and withdrawals from a TFSA are tax-free, every unused dollar of contribution room represents a missed opportunity to grow wealth more efficiently. The good news is that there are practical steps investors can take to boost their TFSA balances over time.

Maximize your contributions first

The simplest way to improve your TFSA balance is to consistently contribute and work toward maximizing your available room.

Many investors prioritize paying bills and other expenses first, contributing whatever is left over to their investments. A more effective strategy is to pay yourself first by setting up automatic TFSA contributions as soon as you receive your paycheque. This removes emotion from the process and helps build wealth steadily.

For example, an investor starting at the beginning of the year would need to contribute roughly $583 per month to reach this year’s $7,000 TFSA limit. If one had only started doing so this month, one would have needed to contribute $1,000 per month. The key is developing a habit of regular contributions and taking advantage of the tax-free compounding that a TFSA offers.

Focus on long-term growth

If you have already maximized your TFSA contributions, the next step is to evaluate your investment strategy.

Historically, stocks have generated some of the highest long-term returns among major asset classes. While individual stocks can potentially deliver outsized gains, they also carry significant company-specific risk. For investors in their mid-50s, a diversified approach may be more appropriate.

Broad-market exchange-traded funds (ETFs) can provide exposure to a basket of companies while reducing the impact of any single stock. Popular options include iShares S&P/TSX 60 Index ETF (TSX:XIU) for Canadian equity exposure and SPDR S&P 500 ETF Trust (ASX:SPY) for U.S. stocks.

The Canadian market remains heavily weighted toward financials (40% of the fund), energy (18%), and materials (14%), while the U.S. market offers greater exposure to technology (39% of the fund), followed by financials (11%), communication services (11%), consumer cyclical (10%), and health care (8%). By regularly investing in diversified ETFs through dollar-cost averaging, investors can participate in long-term market growth while managing risk.

Consider income if retirement is near

Not every investor at age 55 is focused primarily on growth. Those approaching retirement may place greater value on reliable cash flow.

One option is BMO Canadian High Dividend Covered Call ETF (TSX:ZWC), which combines dividend-paying Canadian stocks with a covered-call strategy designed to generate additional income. The fund typically produces an annualized cash yield of around 6.5% and pays monthly distributions, making it attractive for income-focused investors.

However, investors should understand the trade-off. Because covered calls generate income by selling some future upside potential, returns can lag those of a broad-market ETF during strong bull markets. Over the past three years, ZWC delivered annualized returns of approximately 17.9%, compared with roughly 23% for XIU. The fund also carries a higher management expense ratio of 0.72% due to its active management approach.

Investor takeaway

The average TFSA balance for Canadians aged 55 to 59 is $43,519, but the much larger average unused contribution room suggests many investors have room for improvement. Maximizing contributions should be the first priority. From there, investors can focus on building long-term growth through diversified ETFs or generating retirement income through higher-yield investments such as covered-call ETFs. The strategy you choose should align with your goals, but consistently putting more of your TFSA room to work can significantly strengthen your financial future.

The post The Average TFSA Balance at 55 — and How to Improve Yours appeared first on The Motley Fool Canada.

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More reading

• The $109,000 TFSA Benchmark: Here’s How to See Where You Stand
• How to Use a TFSA to Bring in $500 a Month — Completely Tax-Free
• Got $14,000? Turn Your TFSA Into a Cash-Gushing Machine
• This is the TFSA Balance You’ll Likely Need to Retire Comfortably in Canada
• The $109,000 TFSA Milestone: How Do You Stack Up?

Fool contributor Kay Ng 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.