The Average TFSA Balance By Age – Are You Falling Behind?

ByDylan Callaghan Published On:

As you celebrate your next birthday, you might wonder how your Tax-Free Savings Account (TFSA) balance compares to others in your age group. 

TFSAs have become a popular savings tool for Canadians since their introduction in 2009, offering tax-free growth on investments and flexibility for withdrawals.

The average TFSA balance depends heavily on your age, and is something we’ll be going over in-depth in this article.

It’s important to note that individual balances can vary widely based on factors like income, contribution history, and investment choices.

Your TFSA is a powerful vehicle for building your financial future. Whether you’re saving for a short-term goal or planning for retirement, understanding how your balance stacks up can help you gauge your progress and make informed decisions about your savings strategy.

Remember, it’s never too late to start maximizing your TFSA contributions and taking advantage of its tax-free growth potential.

What Is The Average TFSA Balance By Age?

TFSA balances tend to increase as Canadians age, reflecting longer contribution periods and potential investment growth. 

Contribution habits and financial circumstances vary widely among individuals, influencing average balances across different age groups.

Twenties

In your twenties, you’re likely just starting to build your TFSA. The average balance for this age group is relatively low, typically around $5,000 to $10,000. 

Many young adults are focused on education, starting careers, or paying off student loans.

In addition to this, you only start accumulating TFSA contribution room when you are 18 years old. So, theoretically, a 20 year old would at best have a couple years worth of TFSA room accumulated, making it impossible for them to have a large balance.

Some key points for twentysomethings:

  • Start contributing early, even small amounts
  • Take advantage of compound growth over time
  • Consider a more aggressive investment strategy due to longer time horizon

It’s important to note that 52% of TFSA holders report incomes under $50,000, which may impact contribution levels for younger Canadians.

Thirties

As you enter your thirties, your TFSA balance is likely growing. The average balance for this age group typically ranges from $20,000 to $25,000. Career advancement and potentially higher incomes allow for increased contributions.

If you can somehow manage to max out your contributions every year when you are younger, you could theoretically be sitting on a six figure TFSA at this age, particularly in your late 30’s. However, it really depends on your overall discipline in terms of contributions plus your investment returns inside the account.

Key considerations for thirty-somethings:

  • Reassess your investment strategy regularly
  • Balance TFSA contributions with other financial goals (e.g., home ownership, starting a family)
  • Maximize contributions if possible to benefit from tax-free growth

Remember, these are averages, and your personal circumstances may lead to higher or lower balances.

Forties

In your forties, your TFSA balance may be reaching more substantial levels. The average balance for this age group often falls between $30,000 and $40,000.

As mentioned prior, if you’ve been able to contribute every single year to your TFSA since its inception in 2009, you probably have a much larger balance than this. 

You also may have found that contributing to your RRSPs (Registered Retirement Savings Plans) is the better option because of your higher income.  If you are being charged a higher marginal tax rate on your income now than you can expect to pay in retirement, RRSPs have large advantages.

Remember, just because you have a smaller TFSA balance than the average doesn’t mean you’ve done anything wrong. You may just be optimizing your investment portfolio for a more advantageous situation.

I personally know some higher income earners that always maximize their RRSP contributions prior to contributing to the TFSA.

For forty-somethings:

  • Review your investment mix to ensure it aligns with your goals
  • Consider catch-up contributions if you’ve under-contributed or missed a contribution year in the past
  • Use your TFSA strategically alongside other retirement savings vehicles

Balances can vary significantly based on individual financial situations and priorities.

Fifties

As you reach your fifties, your TFSA balance may be approaching its peak. The average TFSA balance for Canadians around age 51 is typically $40,000 to $50,000. This reflects years of contributions and potential investment growth.

At this point in your investing career, you may be looking towards retirement within the next decade. If that is the case, a larger TFSA balance closer to the maximum could certainly help you out in this regard.

Important points for fifty-somethings:

  • Assess your retirement readiness and adjust contributions accordingly
  • Consider a more conservative investment mix as retirement approaches
  • Explore strategies to maximize your TFSA’s tax advantages in retirement planning

Evolution of the TFSA

The Tax-Free Savings Account (TFSA) has undergone significant changes since its inception, affecting contribution limits and the average balance Canadians hold.

These changes have shaped how you can use this investment vehicle to grow your wealth tax-free.

Historical context and legislative changes

The TFSA was introduced in 2009 as a way for Canadians to save money tax-free. 

Initially, the annual contribution limit was set at $5,000. This limit remained unchanged until 2013 when it increased to $5,500. In 2015, the Conservative government temporarily raised the limit to $10,000, but this was short-lived.

The Liberal government rolled back the limit to $5,500 in 2016. Since then, the Canada Revenue Agency (CRA) has made inflation-based adjustments. In 2019, the limit increased to $6,000, and finally, due to higher levels of inflation that Canadians experienced post-pandemic, it was raised to $7000 for 2024.

Strategies for maximizing TFSA value

Selecting the Right Investments

Choose investments that align with your financial goals and risk tolerance. 

For growth-oriented investors, stocks and ETFs (Exchange-Traded Funds) can offer higher potential returns. Consider dividend-paying stocks for a balance of growth and income.

Growth stocks, particularly in emerging sectors, can provide significant capital appreciation. However, they often come with higher volatility. Diversify your portfolio to manage risk.

For more conservative investors, GICs and bonds offer stability and guaranteed returns. While the growth potential is lower, they provide a solid foundation for your TFSA.

Remember, your investment mix can change over time. As you approach retirement, you might shift towards more stable options to preserve capital.

Understanding TFSA rules and flexibility

Familiarize yourself with TFSA contribution limits and withdrawal rules. The annual contribution room is given to you each year, allowing you to save more tax-free.

Unused TFSA contribution room carries forward, so if you haven’t maxed out your TFSA in previous years, you can contribute more now. Keep track of your contributions to avoid over-contributing and incurring penalties.

One of the TFSA’s key advantages is its flexibility. You can withdraw funds at any time without tax implications. The amount you withdraw is added back to your contribution room the following year.

Use this flexibility strategically. For instance, you could withdraw funds for a major purchase and replenish your TFSA later when your finances allow.

Balancing TFSA with Other Retirement Savings

Integrate your TFSA strategy with other retirement savings vehicles like RRSPs. 

RRSPs offer immediate tax deductions, while TFSAs provide tax-free growth and withdrawals.

For many Canadians, a combination of both accounts is ideal. Consider maxing out your TFSA before contributing to your RRSP, especially if you’re in a lower tax bracket now than you expect to be in retirement.

If you are in a higher tax bracket, you may want to think about maximizing your RRSPs first. It is a very personal decision, and one that must be made on an individual level.

Use your TFSA for investments with the highest growth potential or those that generate a lot of income. The tax-free nature of the account means you won’t pay taxes on capital gains, dividends, or interest earned.

Remember, your TFSA can complement your RRSP. You could use TFSA withdrawals to top up your income in retirement years. 

This is useful when you want to minimize RRSP/RRIF withdrawals and their associated tax implications.