As we approach retirement age, it's crucial to consider how we can make the most of our financial resources. The Tax-Free Savings Account (TFSA) is a powerful tool for Canadians, offering a way to grow savings without the burden of taxes. According to recent data, the average TFSA balance for Canadians aged 55 to 59 is $43,519, with an unused contribution room of $57,618. This presents an opportunity to boost retirement savings significantly, especially for those planning to retire around the traditional age of 65.
Finding the Right Balance
As retirement nears, it's natural to become more cautious with investments. Many Canadians opt for lower-risk assets like Guaranteed Investment Certificates (GICs) to preserve capital and generate predictable income. However, retirement can last two decades or more, and a portfolio heavily invested in low-return assets may struggle to keep pace with inflation and the income needed throughout retirement.
A more effective strategy is to divide the portfolio into different buckets. Money needed within the next one to two years can remain in cash or low-risk investments, while funds that won't be required for at least three to five years can stay invested in bonds and stocks. This approach allows investors to better weather market downturns while maintaining long-term growth potential.
A Simple, Diversified Option
One of the most widely used asset allocations for investors nearing retirement is 60% stocks and 40% bonds. The iShares Core Balanced ETF Portfolio (TSX:XBAL) is an excellent example of a simple and straightforward solution. This exchange-traded fund maintains a target allocation of approximately 60% equities and 40% fixed income, and it automatically rebalances to maintain its target mix, removing the need for investors to make regular adjustments themselves.
The fund's management expense ratio is relatively low at 0.19%, and it recently offered a distribution yield of about 3.1%, paid quarterly. Over the past decade, the fund has generated an annualized return of roughly 8%, demonstrating the long-term benefits of staying invested through different market cycles.
Be Selective with Individual Stocks
Investors who prefer building their own portfolios can explore opportunities in high-quality Canadian companies with durable competitive advantages. For example, Toronto-Dominion Bank (TSX:TD) remains one of Canada's leading financial institutions and deserves a place on Canadians' watchlists. However, valuation matters. After a strong rally since 2025, the TD stock price has reached around $171, representing a blended price-to-earnings (P/E) ratio of about 18.5, which is well above the bank's historical average.
Waiting for a more attractive entry point could improve long-term return potential. In my opinion, this is a crucial lesson for investors, as it highlights the importance of patience and strategic timing in building wealth.
Investor Takeaway
The average Canadian approaching age 60 still has substantial unused TFSA contribution room, creating an excellent opportunity to strengthen retirement finances before leaving the workforce. Rather than becoming overly conservative, maintaining a balanced portfolio that combines stability with long-term growth would probably help savings last throughout retirement.
Whether you prefer an all-in-one balanced ETF or carefully selected individual stocks, making thoughtful investment decisions today can improve your financial security for years to come. If you’re uncertain about the right strategy, consulting a qualified financial planner can help you build a retirement plan tailored to your goals. Personally, I believe that the key to successful retirement planning is finding the right balance between growth and stability, and being willing to adapt as market conditions change.
