How to Turn a $10,000 RRSP or TFSA Into $179,000 for Retirement

Canadians use their Tax-Exempt Savings Account (TFSA) and their Registered Retirement Plan (RRSP) contribution space to build portfolios that include top-dividend stocks for a retirement fund. The market correction in 2022 gives investors an opportunity to buy great TSX dividend stocks at bargain prices.

TD bank

TD (TSX:TD)(NYSE:TD) is trading near $88 a share at the time of writing, compared to $108 in February. The decline is part of a broader sell-off that has hit Canadian bank stocks in recent months, as investors began to worry about the risk of a recession next year.

Economists are increasingly forecasting a short and mild recession, prompted by the Bank of Canada’s aggressive rate hikes to bring inflation back to the 2% target rate. Inflation in Canada is currently over 7%. This is putting pressure on households as people are forced to use savings or defer voluntary spending to pay for rising food, gas and utility bills.

Rising interest rates will ultimately hurt businesses and could send the housing market into a tailspin. If a recession turns out to be deeper and longer than expected, there is a risk that a rise in unemployment could trigger a wave of loan defaults.

For now, the job market remains resilient and savings built up during the pandemic are expected to mitigate the severity of an economic downturn.

TD remains very profitable and is taking steps to drive future growth. The bank is on track to surpass its 2021 profits this year. The company makes two acquisitions in the United States that will significantly increase its presence in the American market. TD buys First Horizon, a retail bank, for $13.4 billion. The deal will add more than 400 branches and place TD in the top six banks in the United States. TD also buys Cowenan investment bank, for $1.3 billion.

TD raised its dividend by 13% for 2022. For fiscal 2023, investors should see another double-digit increase. TD’s compound annual dividend growth rate over the past quarter-century is about 11%. That’s the kind of steady spread expansion that TFSA and RRSP investors want to see, whether they’re targeting passive income or total returns.

Buying TD stock during a major downturn has historically proven to be a profitable decision. Additional weakness could certainly appear in the near term, but the stock should rise over the long term. A $10,000 investment in TD stock 25 years ago would be worth about $179,000 today if the dividends were reinvested.

Bottom line, the top stocks to buy for a TFSA or RRSP

There’s no guarantee that TD will achieve the same results in the future, but its strategy of buying top-paying dividend stocks and using the dividends to buy new shares has been a proven way to build retirement savings.

TD is just one example of a great TSX dividend stock that has delivered strong total returns over the years and is currently trading at an attractive price. The Canadian market is home to many leading dividend growth stocks that currently appear oversold and deserve to be on your radar for a diversified TFSA or RRSP portfolio.