An advisor is discussing retirement planning with a client, Sarah, who is 55 and expects to retire at 65. Sarah is employed and contributes to her company's Registered Pension Plan (RPP). Regarding her Registered Retirement Savings Plan (RRSP), what is the maximum amount she can deduct for RRSP contributions in a given tax year?

Question: An advisor is discussing retirement planning with a client, Sarah, who is 55 and expects to retire at 65. Sarah is employed and contributes to her company's Registered Pension Plan (RPP). Regarding her Registered Retirement Savings Plan (RRSP), what is the maximum amount she can deduct for RRSP contributions in a given tax year?

Answer options: ✅ 18% of her previous year's earned income, up to the annual RRSP dollar limit, less any Pension Adjustment (PA).

• The annual RRSP dollar limit, regardless of earned income or PA.
• Her previous year's earned income, without any specific dollar limit.
• Up to $5,000 annually, plus any unused contribution room.

Correct answer: 18% of her previous year's earned income, up to the annual RRSP dollar limit, less any Pension Adjustment (PA).

Explanation: The maximum RRSP deduction is 18% of the previous year's earned income, up to the annual RRSP dollar limit for that year, less any Pension Adjustment (PA). The PA accounts for her RPP contributions, reducing her RRSP room to ensure equitable tax-assisted savings.