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One small benefit of high inflation is a second straight annual increase in the contribution limit for tax-free savings accounts.

This limit is adjusted to account for year-over-year changes in the inflation rate, which has been as high as 8.1 per cent in the past 24 months. As a result, we had a $500 increase in the TFSA limit for 2023 and we’ll get an identical increase in 2024. The ceiling next year will be $7,000, which compares with $6,000 in 2022 and $5,000 when TFSAs became available in 2009.

Looking for ideas on what to put in your TFSA next year? Here are some thoughts for various purposes:

For the patient income-seeker: Beaten-down dividend stocks

The selection of blue-chip dividend stocks that have been slammed this year is frankly alarming. As of late November, Enbridge Inc. (ENB-T), TC Energy Corp. (TRP-T), BCE Inc. (BCE-T) and Bank of Nova Scotia (BNS-T) all had yields above 7 per cent, while Canadian Imperial Bank of Commerce (CM-T), Telus Corp. (T-T) and Emera Inc. (EMA-T) were at 6 per cent or more. A 5-per-cent yield used to be considered juicy for stocks like these; 6 per cent or 7 per cent suggest considerable investor skepticism. Still, these and other beaten-down blue chips have a history of increasing their dividends yearly.

For the aggressive investor: An all-equity asset allocation ETF

The beauty of asset allocation exchange-traded funds is that they wrap bonds and stocks from around the world into a single convenient and cheap-to-own package. If you’re an aggressive investor who can endure short-term volatility for long-term gains, then consider an all-equity asset allocation ETF. You’ll get exposure to Canadian stocks, along with U.S. and international developed and emerging markets. Long-term here means at least five years, preferably 10.

For the investor who is overloaded with stocks: A bond ETF

The growing consensus that central banks will not have to raise interest rates any further to cool inflation suggests we’ve seen the worst for bonds. How bad was it for bonds? Bad enough that the FTSE Canada Universe Bond Index has fallen a cumulative 13.5 per cent over the past three years, and that includes bond interest and price declines. Buying a diversified bond ETF now puts you in a position to capture today’s high yields and benefit from a price rebound when rates decline. If stocks tank, that’s another potential benefit for bonds.

For the TFSA investor who is thinking short-term and doesn’t want any exposure to stock or bond market volatility: A high-interest savings ETF

HISA ETFs hold savings deposits at big banks – there’s no deposit insurance, but the risk level is nevertheless modest. HISA ETFs are affected by new rules from banking regulators that will reduce their yields to the high 4-per-cent range from just above 5 per cent in the next month or two. But if you want to keep money safe and liquid in your TFSA, a HISA ETF has some appeal. Rates are tied to the Bank of Canada’s overnight rate, which is expected to hold steady until well into 2024.

Editor’s note: A previous version of this article incorrectly stated the year TFSAs became available. This version has been updated.

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