Retirement Savings: Maximizing Contributions for 2022

Understanding Retirement Savings and DPSP Contributions

Deferred Profit Sharing Plan (DPSP) is a retirement savings plan where contributions are made by both the employee and the employer. In Wally's case, both he and his employer contribute 6% of his salary each year to the DPSP.

Calculating Maximum Contribution for Wally in 2022

To determine the maximum contribution that Wally's company can make to the DPSP for him in 2022, we need to consider the maximum annual contribution limit set by the Canada Revenue Agency (CRA).

In 2022, the maximum annual contribution limit for a DPSP is calculated as 18% of the employee's previous year's earned income. However, there is a cap on the maximum contribution, which is $29,210 in 2022.

Given that Wally earned $84,000 in 2022, we can calculate 18% of his income, which amounts to $15,120. Since $15,120 is less than the maximum contribution limit of $29,210, Wally's company can contribute up to $29,210 to his DPSP for the year.

It is important to note that individual circumstances and plan rules may affect the actual contribution limit. Consulting the CRA guidelines or seeking advice from a financial advisor can help ensure accurate calculations and informed decisions regarding retirement savings contributions.