Since its inception in 2009, Tax-free Savings Account (TFSA) has continued to grow in popularity. The CRA releases some annual TFSA data with the latest one for 2018 recently published.
In this post, I’ll share some of the key statistics from the TFSA data with you.
Summary of Key TFSA Statistics
Here is a summary of some of the key TSFA data
- There were 14,691,280 unique TFSA accountholders in 2018, representing about 54% of the total tax-filers for the year.
- Total number of TFSAs was about 20.8 million in 2018 but 48.1% had no transactions all through the year.
- 3 out of every 10 TFSA holders have multiple accounts.
- The average contribution per individual in 2018 was $7,811 – higher than the TFSA dollar limit of $5,500 for the year. This suggests that they are catching up with prior years’ unused TFSA contribution room.
- On the average, Canadians contribute to their TFSA about 15 times in a year.
- Only 9.6% of TFSA holders have maximized their available TFSA contribution room.
- The average unused contribution room was $34,165 in 2018.
- Total market value of TFSA was $298 billion or an average of $20,292 per TFSA holder.
- Those earning above $250,000 are 3 times more likely to maximize their contribution room than the average TFSA accountholder.
- TFSA adoption and usage is highest among older Canadians
Detailed data and information are presented below.
Data on TFSA Accountholders and Accounts
The first set of TFSA statistics focus on TFSA adoption using the number of accounts opened and the unique accountholders.
Number of TFSA Holders
A TFSA holder is anyone that is eligible for the account and has opened at least one TFSA. Here, we’re looking at unique Canadians with a TFSA and not the total number of accounts.
There were 14,691,280 TFSA holders as at 2018. That is about 54% of the 27.4 million tax-filers for the 2018 tax year.
What does this tell us about TFSA adoption?
In the 5 years from 2013 to 2018, the number of TFSA holders grew by 37% compared to just 8% increase in the number of tax-filers.
But the growth isn’t driven by Canadians turning 18, the minimum age to open a TFSA.
Rather, the increase in TFSA adoption is largely because of more Canadians taking advantage of the savings scheme.
This suggests that the yearly growth will likely slow down and flatten in the future to a point where new increases will be primarily driven by people turning 18 and new immigrants.
The yearly growth is already slowing down. For example: from 2012 to 2013, TFSA holders increased by 10% (about 1 million) but just 4% (600 thousand) between 2017 and 2018.
Number of TFSAs
Total number of TFSAs was about 20.8 million in 2018. That’s a lot of accounts but on it’s own, the number doesn’t tell us much about TFSA adoption.
At current trend, total TFSAs at the end of 2020 (2 years after the last available official TFSA data) should be above 23 million.
But we know that a good percentage of those accounts don’t have any transactions in a given year.
For example, 9.6 million accounts had no transactions in 2018. That’s a whopping 46.1% of the total number of accounts.
This shouldn’t be surprisingly given the number of new investment products with better offerings and lower fees that have popped up in recent years.
Are people opening new accounts but not using them? Or they stopped operating the old ones but leave the accounts open?
Number of Open TFSAs Per TFSA holder
3 out of every 10 TFSA holders have more than 1 TFSA opened.
In fact, almost 140,000 people had 5 or more accounts. This is interesting, though we don’t know how many of those accounts are still active.
Again, it’s possible people open a new TFSA and never bother to close the old ones. Or they keep both accounts.
The concern here is how difficult it may be to manage multiple TFSA accounts to avoid TFSA over-contributions.
Compared to RRSP over-contributions, going above your TFSA limit is more punitive.
There is no $2,000 excess contribution buffer like you have with RRSP and the penalty still hands even if you withdraw the excess before the end of the month.
Next, let’s look at some data on TFSA contributions.
Contributions by TFSA Holders
58% of TFSA holders contributed to their account in 2018. The statistics seems impressive, although the proportion of those of those making contributions is declining.
But the dollar amount contributed keeps rising. Canadians contributed $67 billion to their TFSA in 2018 for an average of $7,811 per TFSA holder.
Average dollar amount of TFSA contributions (per individual)
The total dollar value of contributions doubled between 2012 to 2018 because of
- More TFSA holders with contributions; and
- Higher average contribution amount per TFSA holder
TFSA Holders who maximized their contributions
Given the obvious tax advantage of TFSA, you would expect that many Canadians will maximize their contribution room.
But only 9.6% of TFSA holders have maximized their TFSA contribution by 2018.
Total number of TFSA holders who maximized contributions
For this TFSA statistics, maximizing contribution room refers to the cumulative contribution room and not the annual TFSA limit.
Here’s a table showing the annual TFSA dollar limit for each year starting in 2013 and the cumulative contribution room.
|Year||Annual Dollar Limit||Cumulative Contribution Room|
|2009 – 2012||$5,000||$20,000|
That is, someone that was 18 when TFSA was introduced in 2009 would have a cumulative contribution room of $57,500 by 2018.
Maximizing their TFSA contributions means they have contributed $57,500 by the end of 2018 and not just dollar limit of $5,500 for 2018.
And as you’ll see below, income and age is a big factor when it comes to Canadians that are maximizing the tax advantage of the TFSA scheme.
Unused Contribution Room
The average unused contribution room was $34,165 for 2018. That is 59% of the cumulative contribution room of $57,500 for 2018.
This data will only get worse as new TFSA dollar limits are added annually.
Also, there’s a glaring disparity between the unused contribution room for lower-income and higher-earning Canadians.
One of the best features of a TFSA is its flexibility around withdrawals.
TFSA holders can always withdraw from their accounts without worrying about a withholding tax like they would if they withdraw from an RRSP before retirement.
Withdrawals by TFSA Holders
In 2018, 4.5 million TFSA holders withdrew from their accounts. That is about 31 percent of all TFSA holders.
And the average amount for those TFSA Withdrawals was $7,689 spread across an average of 5 transactions. That works out to about $1,500 per TFSA withdrawal transaction.
Compare this to the TFSA contribution data: the average Canadian contributed $7,811 over about 15 transactions, i.e. about $500 per contribution.
We can interpret this to mean that many people contribute smaller amounts several times a year, for example with every paycheque, but make fewer withdrawals of larger amounts.
Again, this isn’t surprising.
In dollar terms, a total of $34.7 billion was withdrawn in 2018, more than double the value of withdrawals 5 years earlier in 2013 ($14.6 billion).
Wondering what those withdrawals are used for?
According to the 2019 RBC Financial Independence in Retirement Poll, paying off a debt (25%), making a large or special purchase (24%) and emergencies (20%) are the Top 3 reasons for making TFSA withdrawals.
Related Post: How To Withdraw From TFSA (TFSA Withdrawal Rules)
Fair Market Value of TFSA
Total market value of TFSA was $298 billion in 2018, representing a 152% increase in 5 years.
Here are a few reasons for the remarkable increase:
- First, the number of TFSA holders has increased significantly (37%)
- The average market value has also gone up by 84% to $20,292.
- Investment returns on the invested money
Here’s a quick math:
The net contribution and withdrawals over the 5-year period was roughly $159 billion but the total market value increased by $180 billion.
That works out to about $21 billion in investment returns in those 5 years.
TFSA Adoption and Usage Across Income Levels
Most of the data above look quite different once we consider the income level of TFSA holders.
Below are some of the key TFSA data presented for different income groups.
Maximizing TFSA by Income Class
As mentioned earlier, about 9.6% of all TFSA holders maximized their contribution room in 2018.
But let’s see how the data varies across income class in 2013 and 2018.
Those earning over $250,000 are almost 3 times more likely to maximize their TFSA than people earning between $60,000 and $100,000 in 2018.
Contributions and Withdrawals by Income Levels
Not much of a shocker but income levels have a positive correlation with contributions and withdrawals.
That is, the more you earn, the higher the amount you’ll be able to contribute and then withdraw.
Unused Contributions Room and Market Value by Income Class
The average unused contribution room for all TFSA holders was $34,165 but the figure is just $19,063 for those in the highest income bracket.
That explains why the market value of their TFSA account is more than double the overall average of $20,292:
In summary, I would say some of these statistics are not shocking. There have been several studies and research that supports these data.
And increasing the limits will disproportionately benefit those with higher income and than the low earners. Worse, it’ll do little to encourage savings by Canadians irrespective of the income group.
For example, take a look at the percentage of TFSA holders earning $50,000 to $54,999 and those earning above $250,000 that maximized their TFSAs from 2012 to 2018.
The sharp drops correspond with years when the annual TFSA limits were increased: $500 increase in 2013 and $4,500 increase in 2015.
Most people will only save and invest what is left after covering their basic expenses.
With the big 3 expenses (housing, transport, and food) accounting for over 60 percent of the average Canadian household spending – likely worse for low-income households- there’s just too little left to save and take advantage of registered accounts.
TFSA Data by Age Group
Like income levels, the data shows significant differences when analyzed across age groups.
Here are a few that stood out to me.
Contribution by age
83% of TFSA holders aged 20 years and below contributed to their accounts in 2018. This is quite remarkable given that the overall average is just 58%.
Is it because TFSA is the only registered account available to them at that age? (Note that you need to have earned income in a previous year to accrue RRSP contribution room, but not with TFSA).
Or they have fewer expenses that allows them save more? Or maybe it’s just an early excitement that wears off as they get older?
Total Fair Market Value by Age
Those aged 75 and above represent just 12% of all TFSA holders. Interestingly, they own 22% of the total market value of all TFSAs – a 24 percent gap.
Also, they are almost 2 times more likely to maximize their TFSA compared to the overall average of 9.6%.
This explains why the average TFSA value for the age group far exceeds other age groups.
So why is TFSA adoption highest among older Canadians?
To get a better idea, I reached out to Owen Winkelmolen, a fee-for-service financial planner and founder of Planeasy.ca.
And he has this to say about the data:
“Anecdotally, my suspicion is that higher TFSA use among older individuals likely has to do with a higher capacity to save. Everyone is different, but on average debt reduction is typically more of a focus in 20’s and 30’s. Income also increases quite rapidly during 20’s and 30’s and levels off around age 40. Plus mortgage payments typically remain consistent, represent a smaller percentage of income over time, and eventually get paid off entirely. All this, plus other changes to income and expenses, helps older individuals have a higher capacity to save and maximize tax advantaged space like TFSAs and RRSPs ”
You can check his post about how average income increases more rapidly in 20’s and 30’s here.
Other possible reasons are:
- Tax planning: RRSP withdrawals are taxable, but TFSA withdrawals are not. So it makes sense that as people get older, they’ll choose a TFSA over RRSP
- RRSPs contributions stop at 71: At that age, TFSA is the only tax-advantaged investment account available to many.
TFSA Data Across Province
Here’s the average TFSA value per TFSA holder across the provinces and territories.
You’ll notice that British Columbia has the highest value. It isn’t significant but it’s worth noting that the province also ranks high on many of the statistics.
For example, it has the highest contribution by TFSA holders of $8,673 compared to the Canada-wide average of $7,811.
And if we exclude non-residents, British Columbia also has the highest TFSA withdrawal amount.
Quebec and Ontario are not that far behind – and you can add Alberta, Manitoba and Saskatchewan in some cases.
On the other hand, the 3 territories are at the lower end across board.
In my opinion, province should have little to do with TFSA adoption. It seems the real driver here is income.
That is, people will use TFSA more if their earnings increase and they have higher disposable income, not just because of where they live. But I could be wrong.
There’s been some improvement in TFSA adoption over the years as some of these data shows.
But with about half of all tax-filers still not taking advantage of the tax-sheltering benefits of a TFSA, there is still a big room for improvement.
- Historical TFSA Statistics
- Table 11-10-0044-01 Selected characteristics of tax filers with Registered Retirement Savings Plan (RRSP) contributions
To learn more about TFSA, check out this TFSA Guide.