# RRSP contribution room



## Suzuki12 (Apr 22, 2012)

I have wondered if my rrsp contribution numbers are correct at cra. I'm 54 and have been working since college graduation in early 20's. Low wage jobs until I joined a company with a db pension at age 30. 
I starting at a low wage but significantly higher now. I've had no rrsp contribution room for about 15 years. I've only been able to contribute $9,000 to my rrsp over all these years. 
Seems an extremely small amount. Does this seem right?
Thanks.


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## Cal (Jun 17, 2009)

Have you filed every year? What do the returns state? Do you have an accountant or do you do your own taxes? Does your employer have a RRSP plan or anything that could be eating up some of your contribution room?

$9000 total RRSP contribution room allowed/used seems low over the course of 30 years....


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## Spudd (Oct 11, 2011)

The DB pension will eat up your contribution room to some extent. Unless it's an amazingly good plan, or your salary is very high, it shouldn't eat up all of it, though. 

Do you have your T4 for this year? Check the pension adjustment box. If this is >= 18% of your salary (or >= the cap, which is around 23k), then that is why you don't have any room.


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## Suzuki12 (Apr 22, 2012)

I have filed every year since I started working. I haven't had any contribution room for at least 15 years since my payments into the db pension plan have completely removed any contribution room. I don't expect any chance to put any into my rrsp for recent years but am only thinking of before I started working at my current job with the excellent pension plan.
I used to have an accountant do my taxes but now just use ufile since it's quite straight forward.


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## mind_business (Sep 24, 2011)

Suzuki12 said:


> I have wondered if my rrsp contribution numbers are correct at cra. I'm 54 and have been working since college graduation in early 20's. Low wage jobs until I joined a company with a db pension at age 30.
> I starting at a low wage but significantly higher now. I've had no rrsp contribution room for about 15 years. I've only been able to contribute $9,000 to my rrsp over all these years.
> Seems an extremely small amount. Does this seem right?
> Thanks.


Do you mean you've only had $9000 contribution room EACH YEAR for the last 15 years, or $9000 TOTAL for all of the last 15 years?

Since you have a DB, each year your RRSP allowable contribution room is reduced by the amount the company has put into your DB for you. CRA refers to this amount as Pension Adjustment ... or PA. As an example, my company typically contributes 12% of my wage into my DB. If you were only allowed $9000 total for the last 15 years, then your company must be contributing near the maximum amount of your Contribution room. I've never heard of such a high PA before, however maybe that's what they're doing???


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## Eclectic12 (Oct 20, 2010)

mind_business said:


> Do you mean you've only had $9000 contribution room EACH YEAR for the last 15 years, or $9000 TOTAL for all of the last 15 years?


Good question. 

It would also help to know if before the db pension was started, was that RRSP contribution room used up through personal contributions and/or company matching contribution to an RRSP.

If no RRSP contributions were made, this does not make sense. Most db pensions won't let an employee join for a set period so there should be some contribution room built up before joining the db pension where the PA starts reducing the RRSP contribution room that is being earned for the following year.




mind_business said:


> Since you have a DB, each year your RRSP allowable contribution room is reduced by the amount the company has put into your DB for you. CRA refers to this amount as Pension Adjustment ... or PA.


In a group RRSP or defined contribution (dc) pension plan, yes the PA will be reduced by the amount the total contributions. So if the employer puts $1 in and the employee puts $1 in, the PA = $2.

In a dc pension, the *benefit* is guaranteed. So the calculation for the PA is based on the benefit not the contributions, whether it's the employee or employer or both who contributed.



> _For 1997 and later: PA = [(9 x benefit entitlement) - $600]
> Before 1997: PA = [(9 x benefit entitlement) - $1,000]_


If the benefit calculation is (2% x average of last five years salary x years in plan) for someone making $30K:
PA = [( 9 x 2% x salary) - 600 = [(9 x 0.02 x $30K) - 600] = [ (5400) - 600] = 4800.

http://blog.taxresource.ca/calculati...on-adjustment/
http://www.cra-arc.gc.ca/E/pub/tg/t4084/t4084-08e.pdf




mind_business said:


> If you were only allowed $9000 total for the last 15 years, then your company must be contributing near the maximum amount of your Contribution room.


There must be something that is left out or something seriously wrong.

Working backwards, the $9K divided by 15 years means that for each year, only $600 of RRSP contribution room is being earned. With a maximum RRSP room that can be earned in 2011 at $22,450 - that would mean the PA had to be 21,850.

If the benefit is 2%, it would be something like a $125K salary to produce such a high PA. The wording of the post suggests the salary has been much lower than this.


The main other means I can think of that would reduce the RRSP contribution room is as Cal has suggested. Either a company or personal automatic contributions to say a company group RRSP or personal RRSP.


Cheers


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## Suzuki12 (Apr 22, 2012)

To help clarify I have about $9000 total in my rrsp for all my years working. That is the total cumulative amount for my entire working career. I have no outstanding contribution room. I've had small amounts years ago but none for about 15 years. This years pension adjustment is $23,220.
Before present career no company matching rrsp contributions.


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## Eclectic12 (Oct 20, 2010)

^^^^

With a PA of $23,220 - a small RRSP contribution room being for the period the PA is that high makes sense.

If by this year you mean the 2012 T4, the 2013 RRSP contribution room maximum is $23,820 so there'll be $600 room granted for use in 2013 or later.


The $9K total in your RRSP - is that what it is worth or what you contributed? 
If it's the value in the RRSP - that's driven by the investments chosen plus reduced by any fees charged so it may make sense.


Also - what does the "before present career" mean?

Cheers


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## Suzuki12 (Apr 22, 2012)

"Before present career" means my previous jobs.
The 9K is a little of both contributed and what it's worth. It hasn't had huge earnings or losses.
We have a rental property which is profitable so I presume the extra contribution room comes from that.


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## Eclectic12 (Oct 20, 2010)

Suzuki12 said:


> ... The 9K is a little of both contributed and what it's worth. It hasn't had huge earnings or losses...


To check CRA's numbers - you shouldn't include "what it's worth" (aka fair market value). Any fees or losses are going to make it seem like less was contributed and any gains are going to make it seem like more. As well, CRA does not track the RRSP value, just the contributions.

From what I recall, CRA is tracking:
a) the unused RRSP contribution room (i.e. earned but no RRSP contribution from previous years).
b) net RRSP contribution room earned this tax year (i.e. after deducting the PA).
c) RRSP contributions made and reported in this tax year.
and c) RRSP contributions reported in previous years that have not yet deducted from income.


To figure it out independently from CRA, I suspect you'll need to collect your notice of assessment "RRSP Deduction Limit Statment" for each tax year, your T4s (for your PA) and the statements from your RRSPs (to track the contributions reported by the financial institution versus what was reported to CRA). 





Suzuki12 said:


> We have a rental property which is profitable so I presume the extra contribution room comes from that.


Maybe ... if your regular job income has not already generated the RRSP contribution room so that you'd hit the cap. 

The RRSP contribution room of 18% x earned income is using your total income so it already include your regular job, your rental income and other sources such as investment income (ex. dividends).


Cheers


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