Million Dollar TFSA Baby!

First of all, no I don't have a million dollar TFSA (Tax Free Savings Account), although I am well on my way. Currently with the $5,500 contribution limit for 2017 that brings the total cumulative contribution total to $52,000 for those who were 18 or older since the 2009 initiation. If you've already contributed and earned some gains chances are yours, like mine, is already substantially higher.

I have heard of some people who already have a few hundred thousand, or over a million as a couple in their TFSA accounts, yet I doubt that applies to many of you. Even myself, having doubled many investments, I still had a few losers so I'm still only at a fraction of this million dollar goal. However, it is much more achievable than you may think.

If you tuck it all into some "high-interest" 2% savings vehicle then I'm sorry to say but you're not going to make your million. If on the other hand you do some savvy stock picking, maybe some trading and can get some nice returns, that million could be closer than you think. Personally I've had annual returns of 20%, 30%, 70%, even over 100% in my TFSA, yet as the account grows the high returns become much more difficult to earn.

I've run through a few scenarios ussing the Globe and Mail TFSA calculator found here: http://www.theglobeandmail.com/globe-investor/retirement/retire-taxes-and-portfolios/tfsa-calculator/article29642271/

For all scenarios we'll assume maximum contributions (currently $5,500 adjusted to inflation in $500 increments).

With my current TFSA value and earning 20% per year I'd have my $1 million TFSA in 12 years! Not bad, I'd still be fairly young and have a large chunk of tax free assets capable of earning tax-free income. At that point a more reasonable 4% return on that million is $40,000 per year tax free!

Who cares about me though? Maybe you're an 18 year old with nothing so far and can't expect 20% per year. So let's say you start this year from $0 and earn a more reasonable 10% per year (which will still require efficient investment in equities).

It would take 28 years to reach $1 million in this situation. 46 years old with a tax free million dollar account doesn't sound too bad!

Now a million dollar TFSA is just a nice round goal, as are 10% or 20% annualized returns, but even half a million or a few hundred thousand with 5-7% annualized returns is still pretty great. The TFSA is a great investment opportunity that you should be doing your best to maximize, but this means getting away from those 1-2% returns and ramping up that growth!

Day Trade Canada