TFSA balances lag for many Canadians

The story here is not that Canadians near retirement are ignoring the TFSA. It’s that many are using it late, and that changes what the account can do. By your late 50s or early 60s, the TFSA works best as a mature pool of tax-free assets. But the latest numbers show a lot of people are still in catch-up mode instead. ### What changed this week? A May 11 Motley Fool Canada explainer pulled together recent TFSA balance data for older Canadians and landed on a simple point — balances rise as people approach 60, but they still look small beside the contribution room many people have built up over time. The article leaned on recent federal data rather than a new survey, so the “news” is really the framing: Canadians close to retirement may be underusing one of their best tax shelters. (fool.ca) ### What do the actual balances look like? For Canadians aged 60 to 64, the average TFSA fair market value was $45,109 based on the 2023 contribution year. A separate Motley Fool piece from March highlighted the sharper detail — average unused room for that same age group was about $47,631. In plain English, the typical person in that bracket had more room left on the table than money already inside the account. (fool.ca) ### Is that just a 60-year-old problem? Not really. The pattern shows up a bit earlier too. For ages 55 to 59, one Motley Fool breakdown put the average TFSA balance at roughly $38,334, with unused room around $52,532. Another May 11 age-banded summary, using 2024-year statistics, showed average fair market value climbing from $35,235 for ages 50 to 54 to $43,519 for ages 55 to 59 and $52,381 for ages 60 to 65. So balances do improve with age — but they’re still well below lifetime room. (fool.ca) ### Why does the TFSA feel “underused”? Because the account’s power is not the annual limit by itself. It’s the years. Someone who contributes early gets tax-free compounding for decades. Someone who waits until 58 can still benefit, but the machine has less time to run. That’s the quiet point underneath all these balance comparisons — late contributions help, but early contributions do more work. That inference follows directly from the way TFSA room accumulates annually and how investment growth inside the account stays sheltered. (fool.ca) ### Why do older Canadians still use TFSAs heavily? Because the TFSA solves a different problem than an RRSP. Withdrawals are tax-free, and they don’t count the same way for income-tested benefits like Old Age Security or the Guaranteed Income Supplement. That makes the account especially attractive once retirement gets close and people start thinking less about deductions today and more about flexibility later. (canada.ca) ### Are people still contributing? Yes — and in big numbers. Statistics Canada said 1,322,280 tax filers aged 55 to 64 reported TFSA contributions in 2023, with a median contribution of $6,500. For ages 65 to 74, 1,282,500 filers contributed, also with a median of $6,500. So this is not a dead account for older Canadians. The catch is that many contributors still appear to be filling old gaps rather than investing from a fully built base. (fool.ca) ### What matters in 2026? The annual TFSA dollar limit for 2026 is $7,000. That new room was added on January 1, 2026. So the pile of unused room did not freeze in those older data snapshots — it got even larger this year for anyone who still hasn’t maxed out. That makes the catch-up opportunity real, but it also makes the missed compounding story a little more obvious. (www150.statcan.gc.ca) ### So what’s the bottom line? The surprising part is not that Canadians near 60 have TFSAs. They do. The surprising part is how often those accounts still look half-built. Basically, the TFSA is doing two jobs at once — a late-stage catch-up vehicle for many people, and a long-term wealth engine for the people who started early. The gap between those two outcomes is the whole story. (canada.ca)