With the 2026 tax-free financial savings account (TFSA) contribution restrict at $7,000, the full cumulative room rises to a considerable $109,000 for these eligible since 2009. Nonetheless, there’s a large maximizer hole in Canada. Regardless of the rising room, many eligible residents aren’t utilizing up all of the tax-efficiency edge the TFSA brings to particular person retirement planning.
In accordance with the BMO Funding Survey (2025), the common boomer’s TFSA steadiness was simply above $72,000 going into 2025. These people have been effectively into their rewarding careers when the TFSA went dwell in 2009.
The most recent CRA Statistics (2025 Report) reveal that the common unused contribution room per particular person stands at $49,596. The overwhelming majority of Canadians are leaving their strongest tax-free software underutilized. If you end up with $20,000 in dry powder, you can be forward of the curve. And now it’s time to take a position it like knowledgeable as you’re employed on maximizing all the advantages the TFSA brings to the monetary planning desk.
Right here’s how I’d deploy $20,000 in TFSA investments for 2026, beginning with an alternate traded fund (ETF) as a core holding for immediate diversification.
The core holding: Vanguard FTSE Canada All Cap Index ETF (VCN)
Each resilient retirement funding portfolio wants a stable basis. The Vanguard FTSE Canada All Cap Index ETF (TSX:VCN) is a gold customary for low-cost, broad-market publicity. It affords entry to returns on a $13.2 billion portfolio of 205 small-capmid-cap, and large-cap shares listed in Canada.
If small caps efficiently maximize on development alternatives within the evolving and rebalancing Canadian economic system, traders will take part within the above-average development. If mid-caps capitalize on their superior studying curves to supply superior returns, the VCN ETF investor will get a share. If Canadian giant caps outperform the market as they capitalize on established moats, the ETF will nonetheless go on the positive aspects to traders. It captures returns from “all” market gamers.
The VCN ETF’s extensive diversification comes at a low value, given a administration expense ratio (MER) of simply 0.06%. Traders could anticipate to pay about $0.60 yearly on each $1,000 invested. You get to maintain many of the returns your self, as an alternative of sharing them with the fund supervisor.
Most noteworthy, the ETF has generated about 233% in returns throughout the previous decade. A 2.3% dividend yield ought to offset ETF prices.
I might allocate about half the TFSA steadiness right here, and overlook about it for a very long time as returns compound over time, tax-free ceaselessly.
Purchase Dollarama inventory for defensive development
The remaining half of the $20,000 TFSA steadiness might be cut up over quite a lot of defensive shares and dividend performs on the TSX – simply in case the market worries itself right into a (normally short-lived) recession whereas Canada recalibrates its trade-partners e book.
Dollarama (TSX:DOL) inventory might be a superb candidate for a defensive TFSA inventory to purchase and maintain in 2026. The retailer is a grasp at producing good returns on invested capital (ROIC). Dollarama’s operations generate above-average working margins, and its ROIC at 23% towers above an business common of 16%, incomes the inventory higher valuation multiples, particularly throughout powerful financial occasions.
Furthermore, with operations straddling South America and Australia, the defensive inventory ought to do effectively, even when Canada goes by some financial turbulence. Even when the Canadian economic system weakens, value-seeking shoppers could maintain its gross sales development trajectory.
With a low beta beneath 0.2, the low volatility defensive inventory acts as a TFSA shock absorber in 2026 and past. Traders are paying a premium ahead P/E of 35 for a enterprise that persistently outcompetes its friends.