For many Canadians, the Tax-Free Savings Account (TFSA) has become one of the most powerful retirement tools available. Because contributions grow tax-free and withdrawals are not taxed, the TFSA offers flexibility that other accounts simply can’t match. The key question, however, is: how much should you realistically aim to accumulate before retirement?

The answer depends heavily on your lifestyle expectations and other income sources. Government programs such as CPP and OAS may provide a base layer of income, but they are rarely enough to fully support the lifestyle most retirees want. That’s where personal savings — including a TFSA — become essential.

A practical way to approach the problem is to estimate your annual retirement spending. Suppose you expect to need $70,000 per year and anticipate receiving $35,000 from pensions and government benefits. That leaves a $35,000 annual gap to fill. If your TFSA investments can generate consistent returns and income, they can help close that gap without triggering additional taxes.

Many financial planners use a conservative withdrawal rate of around 4% annually. Using that framework, generating $30,000 to $40,000 per year would require roughly $750,000 to $1 million in invested assets. Not all of that must sit in a TFSA, but building a substantial six-figure TFSA balance — ideally several hundred thousand dollars — can significantly enhance retirement flexibility.

The real advantage of a TFSA is strategic. Because withdrawals are tax-free, you can use them to supplement income in higher-tax years, delay drawing from an RRSP, or avoid pushing yourself into higher tax brackets. That flexibility can reduce lifetime tax burdens and preserve more of your capital.

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The most effective path to a large TFSA balance is consistent contributions, long-term investing, and reinvesting dividends. Growth-oriented stocks or diversified equity ETFs held over decades can compound meaningfully inside the account.

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Ultimately, there is no universal “magic number.” The right TFSA target depends on your retirement goals, risk tolerance, and total savings picture. But the larger and more efficiently invested your TFSA is, the more control and security you’ll have when you decide to step away from work.