What is the formula to calculate RRSP contribution room for an individual?

To calculate the RRSP (Registered Retirement Savings Plan) contribution room for an individual, the formula involves accounting for any Pension Adjustments that affect the available contribution space. Specifically, the correct formulation accurately reflects that individuals must consider their previous year's Pension Adjustment in relation to current and past service contributions.

This is crucial because Pension Adjustments are made to reflect the value of benefits accrued in an employer-sponsored pension plan, and they reduce the amount individuals can contribute to their RRSP. By deducting the previous year’s Pension Adjustment from the current year’s Past Service Pension Adjustment, you arrive at an accurate total of available contribution room, which ensures compliance with RRSP limits while optimizing retirement savings.

The other options do not correctly reflect how RRSP contribution room is calculated. For instance, merely adding all contributions from previous years does not consider the effects of adjustments that may reduce contribution limits. Likewise, withdrawing funds in the previous year may impact the individual’s tax situation but does not directly factor into this specific calculation. Finally, considering unused contribution room can be part of a broader annual contribution strategy, but it does not directly relate to the Pension Adjustments necessary for accurate contribution calculations.