Weekend Reading – Maxed out TFSA edition

Weekend Reading – Maxed out TFSA edition

Welcome to a new Weekend Reading edition: the maxed out TFSA edition.

You can find some other popular recent reads below:

Should you consider an All-Weather Portfolio? What is that anyhow?

With the market being so volatile, is another investing lost decade on the way?

A reminder “tax season” is now on and I’m offering a TurboTax Canada giveaway AND a juicy 15% discount on TurboTax Canada tax preparation software this year:

TurboTax Canada – Common expenses to claim for gig-economy

Finally, congrats to Carolyn who won the copy of Balance on my site with speaker and author Andrew Hallam. Your book is in the mail!

Enjoy the articles!

Mark

Weekend Reading – Maxed out TFSA edition

Can you find/save $125 per week and use that money for investing?

If so, I think you can retire rather wealthy in a few decades…

On that note, Rob Carrick’s update in The Globe and Mail recently caught my eye. Despite the uses related to the TFSA are somewhat infinite as Rob points out, many of those suggestions also in my article here, I hope you already know that TFSAs can also be used for long-term investing. It probably should be.

In Rob’s article, I was surprised to learn the average value of a tax-free savings account in 2022 is $32,234 (according to estimates based on data from Canada Revenue Agency). This is despite total contribution room alone since 2009 introduction of TFSAs amounts to $81,500 per adult Canadian.

From Rob: “As much love as there is for TFSAs, we’re not even close to maximizing their benefit.”

Maxed out TFSA edition

Reference: Rob Carrick, The Globe and Mail.

How true. 

While I can appreciate not everyone has the financial means to maximize contributions to this account, I would suggest if you can, please do. That cost is no more than $125 per week.

If you’re an aggressive investor, as in all equities with your investing, I would not be surprised if your TFSA value is now into the six-figures (if you have managed to have maxed out your TFSA contributions since inception). In fact, it probably should be. 

The TFSA has been around since January 1, 2009. The TSX index (measured by XIU in my example) is up well over 100% since January 2009. Assuming you were invested in lazy XIU for the last 13-full years, and a few months, your TFSA portfolio should be approaching $150,000 later this year assuming 2022 performance is inline with annualized past performance.

I played around with some returns and contributions for this post, and arrived at this estimated value using this free handy calculator on my Helpful Sites page.

Maxed out TFSA edition - Get Smarter About Money

Reference: https://www.getsmarteraboutmoney.ca/calculators/tfsa/

My goodness that’s a chunk of change! Regardless if that’s $140k, $145k or $150k.

I’ve even heard about some million-dollar TFSA accounts floating around in the personal finance sphere, although those are very rare and not accurately validated.

The point is: the TFSA remains a tremendous wealth-building gift to all adult Canadians should you wish to take advantage of it.

I hope you do. Since you can retire on just your TFSA if you wanted to.

Dale Roberts continues to do a fine job with trying to make sense of the markets in this MoneySense article.

With thanks to Scott Barlow, In-house market strategist for Canada’s Report on Business, here are some interesting bank earnings/expectations:

Banks earning season spring 2022

Reference: https://twitter.com/SBarlow_ROB

A fine week in review with thanks to the comprehensive Dividend Hawk – a must follow to gather an aggregate view of company earnings; dividend increases and other news from the world of stocks.

Always interesting to read what other early retirees are thinking this Accidentally Retired FIRE insights survey.

A great interview by Jessica Moorhouse on her latest podcast by Lisa Hannam.

Lisa discussed the evolution of personal finance with Jessica and what a younger generation of savers and investors must consider, as the world of personal finance and investing evolves. To quote Lisa: “life is expensive” at times. It can be even more expensive if you don’t put the necessary financial building blocks in place. 

Financial Independence / Retirement

Here are just a few of my popular posts related to financial independence / retirement:

Yes, you can retire early on a lower income. Read on in this case study how and at what income.

This newcomer to Canada wants to achieve financial independence with his family by age 50. Is he on track?

These millennials want to FIRE at age 50. How much will they need?

Here is a link to a number of free calculators and tools to support your financial planning estimates: a link to them is here and all of them are FREE!

Reader question of the week (adapted for the site):

Mark, what’s your take Michael Burry predicting index funds will collapse? Reference:

https://www.georgegammon.com/michael-burry-predicts-index-funds-will-collapse-i-explain-why/

Thanks so much!

Thanks for your question.

Ha. Well, I’m not sure I believe everything I read on the internet or in videos.

Will index funds collapse? I doubt it.

Will index funds go up and down in price? Absolutely.

Will there be index fund volatility in the near-term? Yup.

I will continue to invest in some low-cost index funds for extra diversification but my main investing approach has been and will continue to be dividend paying stocks. In fact, this was my recent dividend income update. The proof is in the process!

February 2022 Dividend Income Update

Thanks for your readership 🙂

Save, Invest, Prosper!

As always, check out my Deals page, including cash back with BMO with you invest inside your TFSA and RRSP!

One of the best deals I have is with Bank of Montreal (BMO). The reason is: BMO offers commission-free investing for more than 80 Exchange Traded Funds (ETFs), via their self-directed BMO InvestorLine clients based on certain eligibility requirements. The ETFs cover a broad range of asset classes, geographies, management styles and popular themes from Canada’s largest ETF providers, including BMO, iShares and Vanguard. 

Have a great weekend!

Mark

My name is Mark Seed - the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I'm looking to start semi-retirement soon, sooner than most. Find out how, what I did, and what you can learn to tailor your own financial independence path. Join the newsletter read by thousands each day, always FREE.

10 Responses to "Weekend Reading – Maxed out TFSA edition"

  1. Well I learned a lesson on investing with my TFSA. I manage the fully contributed TFSA’s of my wife and son and my own.

    I decided to take more risk with my TFSA by investing in growth stocks recommended by a newsletter I follow. I invested my wife’s in half growth stocks and half blue chip. My son’s is invested in only blue chip dividend paying stocks.

    Well the results as I sit here typing this is:
    my TSFA $58000
    wife TSFA $119000
    son TFSA $113000

    I am not going to make any changes in my TFSA right now and see how it does when the economy and growth stocks recover. But I learned I have to expect volatility investing in growth stocks and if I don’t like the volatility I should stick to dividend paying blue chip stocks.

    Lesson leaned!

    Reply
    1. Hey Roger

      I hear ya loud & clear. I made the same mistake back in 2014-2015. I was still putting the final touches on our investment strategy at the time and learnt the biggest lesson of my entire investing career. (I’ll explain later)

      Anyway, I had also read about putting high risk stocks into the TFSA for big returns. Sure!! We went heavily into oil & gas producers and lost $21k between my wife & my accounts (~28%).

      The first lesson was that high risk in the TFSA is a bad idea. The more important lesson was to never invest in anything directly related to commodities. We then extended that to tech, consumer, gold, pot, crypto, etc and now only invest in dividend income/growth stocks in 5 sectors – banks, utilities, midstream, telco, and REITs. (total of 17 holdings with same book value)

      I’m happy to report that doing this in 2015 has lead to our TFSAs recovering nicely so we now have a combined $256.4k.

      As I always say, I have never made an investing mistake, I’ve just had a few “learning” experiences. 🙂

      Ciao
      Don

      Reply
      1. Great reflections. I personally keep high risk stocks/plays out of the TFSA. I want that for slow and steady income + growth. Any speculative plays go to the taxable to take advantage of any capital loss or capital gain – an efficient form of taxation.

        Combined TFSAs about $256k is solid.

        We all make a few mistakes in our investing paths. I don’t think you make many now Don!
        Mark

        Reply
    2. I find, and you might find as well Roger, that growth stocks need a special set of patience. At least with some dividend paying stocks, the motivation is there via dividend payments and dividend increases that you’re getting some immediate gratification from your ownership.

      See tech sector now. A good time to buy likely. However, growth stocks like tech need modest to low inflation to thrive. Nobody is going to buy a $1,500 iPhone every year when they have to eat as an alternative. I wouldn’t 🙂

      Reply
  2. Depending on market variations I am currently sitting at just under $160K in my TFSA.
    What is more important to me are the divs I get each month. Running around $1.2K per month at present so that gives me $18K (with yearly contribution) to invest every year. So dividends keep increasing yr/yr with little to no effort on my part other than maxing out the contribution each year.

    RICARDO

    Reply
  3. That $125 per week number really puts things into perspective. I think about some senior citizens in my own life, and how much better off they would be today if they could have found even that small amount to save per week. Or hell, even monthly! Thank goodness for OAS and GIS for seniors in this situation (ones that actually need it).

    Nowadays, with inflation running hot, saving and investing is as important as ever. No one can predict what will happen over a lifetime of work. But you’re much more likely to be better off if you can save early and often. It bears repeating!

    Reply

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