Mr. Henderson, 55, earns $120,000 annually. He wants to optimize his retirement savings and decides to contribute the maximum allowable to his RRSP. Assuming the maximum pensionable earnings (MPE) for the previous year were $66,600 and the contribution limit for the current year is $30,780, his pension adjustment (PA) for the prior year was $8,000, and he has $15,000 in unused RRSP contribution room. How much can Mr. Henderson contribute to his RRSP this year?

Question: Mr. Henderson, 55, earns $120,000 annually. He wants to optimize his retirement savings and decides to contribute the maximum allowable to his RRSP. Assuming the maximum pensionable earnings (MPE) for the previous year were $66,600 and the contribution limit for the current year is $30,780, his pension adjustment (PA) for the prior year was $8,000, and he has $15,000 in unused RRSP contribution room. How much can Mr. Henderson contribute to his RRSP this year?

Answer options:

• $30,780
• $22,780 ✅ $37,780
• $15,000

Correct answer: $37,780

Explanation: Mr. Henderson's maximum contribution room for the current year is his previous year's earned income multiplied by 18% ($120,000 * 0.18 = $21,600), up to the annual maximum ($30,780), less his current year's pension adjustment ($8,000), plus any unused contribution room ($15,000). So, it's min($21,600, $30,780) - $8,000 + $15,000 = $21,600 - $8,000 + $15,000 = $28,600. The question indicates he wants to maximize his current year's allowable contribution. However, the calculation should be: New room for current year = 18% of prior year's earned income (max $30,780) - Prior year's PA. So, $30,780 - $8,000 = $22,780. Adding unused room: $22,780 + $15,000 = $37,780.