In line with current knowledge, the typical Canadian aged 54 has a Tax-Free Financial savings Account (TFSA) stability of $45,000 to $55,000. Let’s name it $50,000 for simplicity.

This can be a far cry from what the utmost contribution room could possibly be. Should you had been born in 1991, have been a resident of Canada since earlier than 2010, and have by no means contributed, your whole TFSA contribution room for 2024 is $95,000. Plus, you’ll get one other $7,000 of room in 2025.

Should you’re round 54 years outdated and sitting on a $50,000 to $55,000 stability, you’ve obtained two choices. You’ll be able to both give attention to development to spice up long-term worth or optimize it for passive revenue era – particularly if early retirement is in your thoughts. Listed below are two ETF picks tailor-made for each methods.

Investing for development

Should you don’t want revenue out of your TFSA, think about placing your $50,000 into an index ETF just like the iShares S&P/TSX 60 Index ETF (TSX:XIU).

XIU holds 60 blue-chip Canadian firms with a portfolio dominated by the banking and vitality sectors – precisely what you’d count on from Canada’s largest and most established companies. It additionally comes with an inexpensive administration expense ratio (MER) of simply 0.18%, making it a cheap selection.

In case your purpose is to retire at 64, that provides you a 10-year time horizon. From November 18, 2014, to November 18, 2024, XIU, with dividends reinvested, compounded at an annualized price of 8.8%. At that price, your $50,000 may develop to $116,128.95 in 10 years.

Investing for revenue

Should you’re seeking to obtain FIRE – Monetary Independence, Retire Early – your $50,000 TFSA may also help present a month-to-month, tax-free passive revenue enhance. A superb ETF for this objective is the Hamilton Enhanced Multi-Sector Coated Name ETF (TSX:HDIV).

HDIV holds a number of Hamilton ETFs designed to carefully mimic the composition of the S&P/TSX 60 Index. Nevertheless, it goes a step additional by using 1.25x leverage and writing lined calls to boost its revenue potential.

At present, HDIV presents a outstanding 11.8% annualized yield. Curiously, HDIV’s whole return (with distributions reinvested) internet of charges has even outperformed the index since its inception, one thing that’s very arduous for actively managed ETFs to do.

With a $50k TFSA, you might purchase 2,785 entire shares of HDIV primarily based on its November twentieth worth of $17.95. Assuming its final month-to-month distribution of $0.171 per share stays regular transferring ahead, you might generate $476.24 per 30 days of tax-free passive revenue.