indicatorInvesting and Saving

The “million-dollar” TFSA

By Mike Winsor, CFPⓇ 7 December 2023 3 min read

Since its creation in 2009, the Tax-Free Savings Account (TFSA) has been a popular investment vehicle. The reason behind that is simple:

  1. It lets your money grow tax-free with no taxes when you withdraw, making it both easy to use and understand. 
  2. Any money you withdraw can be put back in anytime after Jan. 1 of the following year without penalty. 

So while it doesn’t offer the tax deduction that comes with a RRSP contribution, the long-term advantage it offers is significant. 

The amount that you can contribute to your TFSA is limited by your individual TFSA contribution room. Your individual TFSA contribution room is calculated as follows: 

Aside from a significant deviation in 2015, the annual TFSA dollar limit has been comfortably situated between $5,000-$6,500 per year:

The 2024 dollar limit was recently announced to be $7,000—bringing the cumulative total to $95,000 for 2024. So, why have we titled this article the “million-dollar” TFSA? It’s to highlight the opportunity this account provides, when considering existing contribution room, projected future contribution room and investment growth.


If the annual TFSA limit continues to increase over time, at what point might a TFSA reach a million dollars?

Let’s look at an example of someone who is just starting their TFSA with the full cumulative total of $88,000 available, topping it up with their other investments at the end of this year. For this example, we will assume Year 1 is 2024, long-term inflation is 2% per year and investment growth is 5% per year annualized.1 We also assume that the full (projected) TFSA contribution was made on January 1 of each year:

Year

Beginning
Balance

Projected TFSA dollar limit2

Jan 1 Balance

Growth

Year-end
balance

1 $88,000 $7,000 $95,000 $4,750 $99,750
2 $99,750 $7,000 $106,750 $5,338 $112,088
3 $112,088 $7,000 $119,088 $5,954 $125,042
4 $125,042 $7,500 $132,542 $6,627 $139,169
5 $139,169 $7,500 $146,669 $7,333 $154,002
6 $154,002 $7,500 $161,502 $8,075 $169,578
7 $169,578 $7,500 $177,078 $8,854 $185,931
8 $185,931 $8,000 $193,931 $9,697 $203,628
9 $203,628 $8,000 $211,628 $10,581 $222,209
10 $222,209 $8,000 $230,209 $11,510 $241,720
11 $241,720 $8,500 $250,220 $12,511 $262,731
12 $262,731 $8,500 $271,231 $13,562 $284,792
13 $284,792 $8,500 $293,292 $14,665 $307,957
14 $307,957 $9,000 $316,957 $15,848 $332,805
15 $332,805 $9,000 $341,805 $17,090 $358,895
16 $358,895 $9,000 $367,895 $18,395 $386,290
17 $386,290 $9,500 $395,790 $19,789 $415,579
18 $415,579 $9,500 $425,079 $21,254 $446,333
19 $446,333 $10,000 $456,333 $22,817 $479,150
20 $479,150 $10,000 $489,150 $24,457 $513,607
21 $513,607 $10,000 $523,607 $26,180 $549,788
22 $549,788 $10,500 $560,288 $28,014 $588,302
23 $588,302 $10,500 $598,802 $29,940 $628,742
24 $628,742 $11,000 $639,742 $31,987 $671,729
25 $671,729 $11,000 $682,729 $34,136 $716,866
26 $716,866 $11,500 $728,366 $36,418 $764,784
27 $764,784 $11,500 $776,284 $38,814 $815,098
28 $815,098 $11,500 $826,598 $41,330 $867,928
29 $867,928 $12,000 $879,928 $43,996 $923,925
30 $923,925 $12,000 $935,925 $46,796 $982,721
31 $982,721 $12,500 $995,221 $49,761 $1,044,982

Based on these assumptions, this person would reach half a million dollars in 20 years and $1 million in 31 years. If they have a spouse who is also maximizing their TFSA, they would have $1 million combined in 20 years!

The above example demonstrates the value of making regular investment contributions over time, combined with compounding tax-free returns.

Barring government intervention, TFSAs are on track to become a major element of retirement plans for many Canadians—to the point where it may be their largest asset at various points in retirement. Make sure to consider how your TFSA fits within your retirement plan and avoid having your plan be overly reliant on future contribution room assumptions.

If you’d like to learn more about TFSAs, check out ATB Wealth’s TFSA reference guide or contact an ATB Wealth advisor.

ATB Wealth experts are ready to listen.

Whether you're a beginner or an experienced investor, we can help.