Is it true that if I fix 5500 dollars at a TFSA (Tax-Free Savings Account) at 5.5% interest and 500 dollars yearly bump then after 40 years someone will retire with a million dollar? Is it an efficient way to retire as a millionaire?

TFSA Savings and Million dollar within 40 years

Here is another link from the daily newspaper Globe and Mail in Canada:

Can anyone kindly tell me if they are right or not?

More elaborative

  • No, it's not true. Initial contribution of $5,000 with $500 added at the end of the year, compounded for 40 years at 5.5% is about $115k+ Commented Apr 13, 2019 at 17:04
  • But if you fill out the number of the years text field to 40 years and press enter it will show you that the money will be invested. And investment return is $788,249.64 and total contribution $399,500.00 Can you tell me what these numbers represent? So the money is not just sitting there in TFSA but invested in diverse sectors. Am I right?
    – user76016
    Commented Apr 13, 2019 at 17:46
  • I can't tell you what the numbers represent since I think that there's something wrong or missing in your link. From your description, an initial contribution of $5,000 with $500 added at the end of the year, compounded for 40 years at 5.5% is $115,126. I just verified that here: mdm.ca/tools/compound-growth Commented Apr 13, 2019 at 17:50
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    Make life (calculations) easier. $5,500 initial deposit with $5,500 contributed at the end of each year compounded for 40 years at 5.50% would yield $794k. Commented Apr 13, 2019 at 19:48
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    No, it's not efficient (even if you actually do wind up with a million), since it takes 40 years of saving. The efficient way is to arramge to be born to wealthy and indulgent parents, who'll just give you the money :-)
    – jamesqf
    Commented Apr 14, 2019 at 4:07

2 Answers 2


Don't make it too complicated, the $500 bump is for inflation and it's not every year. Just ignore it and do all your calculations in real dollars. That will also give you the current value of what the future money is worth. Note that a million dollars in 40 years will buy much less than it will today.

For 2019 it's actually $6000 to start and the return should be about a real 3.5% since the Bank of Canada is aiming for 2% inflation.

So the answer is =FV(0.035,40,-6000,0,1) in excel = $525,057 (FV is Future Value)

Note that this will actually be more by the amount of inflation over 40 years = 1.02^40 = 2.21. So you will have ~$1.16 million but it will only spend like $525k today.


Can anyone kindly tell me if they are right or not?

Their math seems fine, the important thing to note is that the annual contribution limit increases with inflation. If you take the default values from your first link and enter 40 years, you'll see in the annual breakdown that year 1 you contribute $5,500, and that increases every 2-3 years until you contribute $16,500 in year 40. In total you are contributing $399,500 over 40 years and earning $788,249 in interest if the actual rate of return was pegged at 5.5% for 40 years. If you uncheck the 'I will maximize my annual contribution' box you can enter in a fixed annual contribution amount or do a percentage based increase and examine other scenarios.

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