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TFSA Master Class – Lesson 4: Using a TFSA to pay the way, early in your career

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If you’re an educator early in your career – now more than ever you need to think ahead to retirement.

We know what you’re thinking: retirement is a long way off. So putting money away for your ‘after school’ years might not be at the top of your financial priority list. Furthermore, as someone on the lower end of the pay grid, chances are you’re just trying to make ends meet (after making payments on your school loans, credit cards, and other bills). Plus with a pension plan in place, you may feel that putting aside additional funds for retirement is unnecessary.

However, with 146 retired teachers now over the age of 100 in Ontario alone—the reality of living longer in retirement means needing to have a financial savings plan in addition to your pension.

You have a pension, but will you have enough to retire?

Use our new Pension Income Gap Calculator to find out you’re on track to fund your retirement dreams.



While your pension will still be the main financial constant you can count on in retirement, putting away a little extra over the years will guarantee an extra sense of financial security during a time in your life when you will need it most. Fortunately, as an educator who is early in your career—you have the luxury of time and a tax-free savings vehicle on your side.

Here are 3 easy steps on how to use a TFSA to pave the way to financial security in retirement:

Step 1: Set up monthly deductions (an early stage savings habit that really adds up).

Setting aside just $50 to $100 each month is all it takes. The best part is, if you have that money automatically deducted from your bank account and transferred into your TFSA, you won’t even miss it. Sure it may require scaling back those daily cappuccinos or the amount of times you eat out in a month. However, it’s a small sacrifice in the grand scheme of your potential savings down the road (which we will paint you a clearer picture of in step 2).

TIP: free up your monthly cash flow by consolidating high-interest debt. 

From department store and bank credit cards, to car and student loans, the interest charges on all of those monthly payments can really add up. Securing a low-interest line of credit to pay off multiple high-interest debts is one of the easiest and most immediate ways you can free up cash flow to invest in your TFSA.

Did you know Educators Financial Group offers low-rate lines of credit? Learn more.

Step 2: Regularly ‘feed’ your investment and watch it grow.

For this next step, we’ve used the financial goal of building your own gratuity (or a financial cushion to complement your pension income in retirement) as a long-term example of what you could use a Tax-Free Savings Account for. Considering the average retirement gratuity earned used to be roughly half of an educator’s salary (assuming that educator was earning top-of-the-grid wages of $94,000 by the end of their career)—that would mean a gratuity of as much as $47,000 at retirement.

Now let’s crunch the numbers to see how a gratuity-building TFSA investment strategy can potentially add up over time:

EXAMPLE Monthly TFSA Contribution Estimated Annual Rate of Return Investment Timeframe Build Your Own Gratuity Amount
A $57 5%* 30 years $47,636.00
B $100.00 5%* 30 years $83,573.00

Build your own gratuity – example A: To achieve that same $47,000 at retirement, at age 28, Sarah Jane would have to start contributing $57 a month over the next 30 years (assuming an average annual rate of return of 5%*).

Build your own gratuity – example B: If Sarah Jane decided to invest a little more into her TFSA, say $100 a month for 30 years starting at age 28—by the time she’s 58, Sarah Jane will have built up $83,573.00 (again, assuming an average annual rate of return of 5%*).

As you can see, putting away as little as $57 a month can really add up to a substantial amount over time. Then, as you move up the pay grid, you can increase those monthly contributions to your TFSA in order to build that gratuity even bigger.

Step 3: Ask for educator-specific advice on how to invest your TFSA—the sooner, the better.

As we described in the Lesson 1, a TFSA is not just a place to park savings. Within this flexible account, you can blend any number of investments in order to build your own gratuity or save towards any other financial goals you have (i.e. down payment for home/car, travel fund so you can take that deferred salary leave, etc.).

Of course, getting expert advice to ensure the right investment mix is essential.

That’s where speaking with an Educators financial specialist can be your best option when it comes to creating the right portfolio based on your current financial situation and your overall financial goals.

Because we’re familiar with pay grids, pension plans, and how an educator’s finances can be impacted by changes over time, we’re in the best position to help you create a financial plan that is specific to your needs and goals. Whether those goals are long-term, short-term, or somewhere in between—the earlier you start planning, the better off you’ll be.

Have an Educators financial specialist contact you to kick-start your TFSA goals for tomorrow, today. Plus check out The Learning Centre to enhance your financial literacy on a wide range of other topics.

* Based on an estimated annual rate of 5% using a compounded interest calculator. The rate of return is used only to illustrate the effects of the compounded growth rate, and is not intended to reflect future values, or returns. Commissions, trailing commissions, management fees and expenses may all be associated with mutual funds. Mutual funds are not guaranteed, as their values change frequently and past performance may not be repeated. Please read the prospectus before investing.

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