The gift that gives

.

  By Guest Blogger Sinan Terzioglu

.

The TFSA contribution limit is expected to rise to $7,500 in 2027, bringing the cumulative limit to $116,500 for someone who has been eligible since the TFSA was introduced in 2009.

For a couple, that’s $233,000.

That’s almost a quarter of a million dollars a couple can invest and potentially grow for decades without paying tax on the investment income, capital gains or eventual withdrawals.

Yet most Canadians are doing a surprisingly poor job of taking advantage of it.

According to the latest CRA data, Canadians collectively held more than $745 billion in their TFSAs at the end of 2024. Yet Canadians are still leaving a significant amount of contribution room unused. The average TFSA holder had more than $52,000 of unused contribution room.

Even many high-income Canadians aren’t making full use of their TFSAs. For most people, housing is the biggest expense and the hardest one to change. But look beyond the mortgage or rent and there are often some fairly obvious places to free up extra cash.

Vehicles

If your TFSA isn’t maxed but your car payment is bigger than your monthly TFSA contribution, there’s a pretty good chance you’re spending too much on the car.

A $900 monthly car payment works out to $10,800 a year going toward an asset that, in almost every case, will be worth less as it gets older. There’s nothing wrong with owning a nice vehicle, but there’s an opportunity cost that often gets ignored.

Redirect $500 a month to your TFSA and that’s $6,000 a year invested instead of spent. Assuming an average annual return of 7%, $500 invested monthly for 30 years would grow to approximately $600,000. Keep doing it for another 10 years and you’re approaching $1.3 million.

Nobody feels that difference after the first year. That’s precisely why it’s so easy to choose the nicer car today. The real cost becomes obvious 20+ years down the road.

I’m not suggesting we all drive beat-up Corollas until the wheels fall off. But if the car payment gets funded every month while the TFSA doesn’t, I’d take another look at the priorities.

Insurance

The same thinking applies to permanent life insurance. Insurance is important, but that doesn’t mean everyone needs an expensive permanent policy.

In 2023, Ontario’s insurance regulator reviewed the sale of Universal Life insurance and found some troubling results. In 83% of the client files reviewed, there was no indication the client had any money in a TFSA or RRSP. In 80%, there wasn’t a clearly identified need for the insurance being recommended. The review also found examples of retirement planning advice that was misleading, incomplete or misaligned with clients’ needs.

Permanent insurance can make sense in the right circumstances, particularly for estate planning, incorporated business owners and those with a genuine permanent insurance need. But those situations are relatively limited, and for most people I’d prioritize maximizing the TFSA before looking to permanent insurance as another tax-sheltered investment vehicle.

For most people, term insurance can provide the coverage they need at a much lower cost. If you still have significant unused TFSA room, it’s difficult to justify paying substantially more for permanent insurance mainly for the investment component. Get the insurance protection you need, invest the savings in your TFSA, and take advantage of the simple opportunities first.

Small Purchases, Big Opportunity Costs

Then there are the expenses that don’t feel like much at the time. A coffee on the way to work, lunch from a restaurant or dinner showing up courtesy of Uber Eats.
Spend $15 on lunch five times a week and that’s more than $3,600 a year. Add a few $5 coffees and food-delivery orders and suddenly you’re talking about thousands of dollars.

If your TFSA is already maxed, enjoy it. But if you’re sitting on $50,000 of unused contribution room and wondering where you’ll find the money to contribute, your credit-card statement might be a good place to start.

You don’t have to give up coffee, restaurants, or anything else you enjoy. The point is to make sure today’s conveniences aren’t consistently taking priority over tomorrow’s financial independence.

Then Invest It

Getting money into a TFSA is one thing. What you do with it once it gets there is just as important.

A BMO Annual Investment Survey found that only 53% of TFSA holders were actually investing their money. The remaining 47% held cash.

Successful investing doesn’t have to be complicated. You don’t need to find the next Apple, Nvidia or Shopify, spend your day watching BNN or CNBC, or try to guess which sector will be next year’s winner.

My preference is much more boring.

Own low-cost, globally diversified ETFs that gives you exposure to thousands of companies around the world. Keep adding to it. Rebalance occasionally. Ignore the headlines and resist the temptation to constantly make changes.

Most importantly, stay invested and give compounding the time it needs to work.

The Long-Term Payoff

Consider a 30-year-old earning $75,000 a year who starts contributing $7,500 annually to their TFSA and keeps doing it until age 65.

Assuming an average annual return of 7%, those contributions could grow to more than $1 million over 35 years. And unlike an RRSP, withdrawals from that $1 million would be completely tax free.

Add CPP and OAS and the picture becomes even more compelling. Even without an RRSP or workplace pension, a 7-figure TFSA combined with government retirement benefits could provide a meaningful and sustainable retirement income.

There’s nothing particularly exciting about contributing to a TFSA every month, buying diversified ETFs and leaving them alone for decades. But that’s exactly the point. Building wealth usually isn’t about finding the next great investment or coming up with some clever strategy. It’s about consistently making good decisions, taking advantage of the opportunities already in front of you and giving compounding enough time to do its work. Your future self probably won’t remember the car you decided not to upgrade or the extra takeout you skipped. But you’ll certainly appreciate the 7-figure TFSA those decisions helped build.

Sinan Terzioglu, CFA, CIM, is a financial advisor with Turner Investments, Private Client Group, Raymond James Ltd.  He served as vice-president of RBC Capital markets in New York City and VP with Credit Suisse in Toronto.

.

About the picture: “While Vancouver humans tremble at terrifying housing costs, Ozzy isn’t spooked one bit,: writes John. “Who cares about scary mortgage rates when your entire net worth is tied up in plush toys? Sitting proud in front of the jack-o-lanterns, this little fluffball is completely unfazed by skyrocketing paw-perty values – as long as his tiny orange ball doesn’t get foreclosed on.”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.

Source: https://www.greaterfool.ca/2026/11/01/the-gift-that-gives/