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work | SMART Seasons of change at the Mint When you’re in charge of producing all of Canada’s coins, change is inevitable

Derek Gagnon The Royal Canadian Mint began providing pocket

change for the nation since opening its Ottawa facility in 1908. Tom Roche is senior director for manufacturing and

Canadian circulation at the Winnipeg facility. He explains how Canada’s second mint came to be. By 1960, capacity had been reached and Canada had

to rely on their American neighbours to produce some of Canada’s coins until a new facility could be made. “Te Ottawa facility had reached a point where capacity

needed to expand as demand increased,” said Roche. “Ot- tawa could not expand in the footprint of land it had, so we began to look elsewhere. “Te new facility was going to be responsible for the dis-

tribution and redistribution of coins across the country. It made sense to have a central location, and Winnipeg was a perfect fit.” Te Winnipeg facility officially opened at the corner of

Fermor Avenue and Lagimodiere Boulevard in 1976, having begun producing coins the previous year. Te new facil- ity meant the Ottawa plant could switch from producing circulation coins like pennies, nickels, dimes and quarters to collectors’ coins and medallions. Te collectors’ coins are available for purchase at the Winnipeg facility and at a retail store the Mint now has in Vancouver, but they are ultimately still made in the nation’s capital. Supporting the local economy

“Te Winnipeg facility has roughly 300 jobs in all sec-

tors,” said Roche. “Tey include manufacturing, engineer- ing, research, material planning and various administra- tion roles. “Well over 90 per cent of our staff is Manitoban, as we feel

it’s nice to have locals who know and appreciate the culture here. It’s important that everybody fits in well, which is easier when they’re from the area. Sometimes we’re forced to fill some speciality roles externally, but the goal is always to fill the position locally when possible.” One way to ensure that your employees are the right

people for the job is to be involved with their education prior to hiring. “We have co-op programs with local post-secondary

institutes, allowing us to mould and constantly evaluate the next generation coming into the industry,” said Roche. “We are partnered with the Universities of Manitoba and Winnipeg, as well as Red River College.” Adapting to the digital age

Roche insists that the Mint has nothing to worry about

with the popularity of e-commerce, as people will always need coins. “We are very aware of how digital payment has increased

The Royal Canadian Mint strikes a distinct silhouette against the Prairie sky. Photo by Dan Harper. Courtesy of the Royal Canadian Mint.

in popularity, but coinage remains the backbone of daily commerce. Tere has been minimal change in demand, while improvements in technology have decreased the cost. We are confident that coin demand will be steady for the foreseeable future. “We operate at 70 to 80 percent of our potential capacity,

and our plating capacity increased significantly with our expansion two years ago.” Expansion

With changes to superficial finishes and electric signa-

tures, coins are becoming more secure than ever. Tis cuts down on counterfeit coins. A lot of work had to be done with the vending machine industry, which required a level of standardization amongst the machines to ensure that they could accept both the new and the old coins. With the need for new technology, the Mint decided to

expand their Winnipeg facility. Te 70,000 square-foot plating facility expansion and the Hieu C. Truong Centre of Excellence for Research and Development allows the Mint to stay on the leading edge of minting, which ensures they can produce a highly secure coin at as low a cost as possible. Te decision to upgrade monetization was made after a

throne speech in 2010, with the Royal Canadian Mint and the Bank of Canada each upgrading their currencies, as the Bank of Canada is in charge of bank notes for the country. Foreign business

Demand for coins at any given time fluctuates based on

local and international need, so while the Mint has served over 75 countries since opening the Winnipeg facility in 1976, the number being served at any given time is less. Te Mint currently has the objective of producing 15 percent of the global market share by the year 2020.

making your RRSP investment before the 2015 contribution deadline of February 29th. You should not be making

It’s RRSP season - but are you prepared? W

herever you may be in your own financial planning process, you are now being bombarded about

an RRSP investment based on the siren song of getting a tax refund. What you put in your RRSP should be part of an over- all thought out financial plan. We began that process with my December column about the three keys of financial inde- pendence, the first being that you need to take responsibility for it: only you can make the executive decisions reflecting your goals, even while you make use of financial profes- sionals to put it into action. January explained the second key, allocat- ing your cash flow while always keeping net cash flow positive! I was going to explain the third key, how to do that, but the third key can wait for March. Tis column is about responding this month, or not, to all the ads and pressure from advisors and peers. Later this year I plan to get into tax

How much of your previous year taxable income you decide to defer paying tax on by depositing it in a registered retirement savings plan is one decision. What to invest that RRSP de- posit in is a separate decision with different criteria. This column is about the

first decision, but we’ll wrap up with thoughts about your investment choices for the money you set aside in an RRSP. An RRSP is a good tool for


Literacy Fred Petrie

applying one of the four D’s of tax planning, namely, DE- FER. Te strategy is to avoid paying tax on income as long as you can. Te RRSP allows you to deposit a percentage of taxable income, up to a dollar limit, and defer paying tax on

planning strategies. Te greatest threat to your financial independence is not debt from frivolous spending on credit cards, or excessive fees for financial advice. It is the Canada Revenue Agency. You need to manage your money by using all the (legal) tactics to minimize the tax impact on your cash flow. Te RRSP is one tactic to do this. Understand that an RRSP is not an invest-

ment. Yes, I know, we all talk about invest- ment in our RRSP, but this is not correct.

February 2016

it. Say you earned $100,000 and decided to defer tax with a $10,000 RRSP deposit. Te marginal tax rate for you in Manitoba for 2015 was 43.4% so the tax payable on the marginal $10,000 of income would be $4340. You could defer paying that tax if you deposited it in an RRSP. If it had already been taxed as employment income, you could then get a refund of $4340! Pretty good deal, right? Hang on, understand that the $4340 is not

really your money, it is CRA’s money; it has only been “loaned” to you. When you take that money out, say for income when you retire, you will have to pay tax on it. Te tax “savings” only happens if in retirement you have less income and the RRSP withdrawal is taxed at a lower marginal rate. For exam- ple, if your retirement income is $70,000

when you withdraw that $10,000, the MTR is 39.4%; the 4% difference in MTR is a real saving of $400. Tat may be the best scenario for a RRSP

tax saving. You might be financially suc- cessful where you are in the same or an even higher MTR bracket when you withdraw the money. So in your senior years you continue to “defer” tax by not making RRSP with- drawals. But CRA always gets their money in the end so the rules require you to start making minimum withdrawals from age 71. As a result, far too many people end up dying (assuming no spousal roll over) where all registered money becomes income on the date of death. Tat could mean a half million left in registered accounts would attract the highest MTR of 46.4% (in Mani- toba for 2015, soon to be 50% or more when Justin and Greg get finished!). So in planning your RRSP contribution

for 2015, understand the refund is not a tax “Saving”, it is only a “loan” that will have to be repaid, hopefully with a small net real saving, but possibly with a considerable surcharge. Before you decide to not invest in an RRSP

(there, I did it myself!), there is in fact an upside available. Because the RRSP lets you invest the $10,000 in our example, instead of the $5660 you would have had left after paying tax, you have that extra $4340 from the CRA “loan” earning returns. Say you were able to net an average 7.2% return on investment, you would double your money in ten years; that would give you $20,000 instead of $11,320. Even better, add the refund to the RRSP and have $14,340 work- ing for you, $28,680 after ten years! Ten we can look into tactics to minimize the loan repayment to CRA.

Te RRSP annual advertising campaign

may also suggest you borrow the money to make your maximum RRSP deposit, using the tax refund to pay down the loan. Space does not permit a full treatment of this tac- tic, so just remember, there is no free lunch. All loans have to be repaid eventually, so make sure you have worked out how you are going to do that (while keeping your net cash flow positive!). Once you have decided how much you

are going to deposit in an RRSP for 2015, your next decision is what to put it in. Tere is a wide, nay infinite, variety of choices, from low (to zero) interest bank accounts to high volatility equity funds. Your criteria become risk tolerance, balance in the types of investments, diversification (sector and geography) and should include dollar-cost- averaging. If you have left it a little late for consider-

ing all these choices as well, just decide the amount for the RRSP and stick it in a regis- tered bank account for now. Come March, look into the investment options and move the money then. Tat is a good reason to sep- arate the RRSP amount and the investment decisions; while the RRSP deposit has a deadline, you can always move investments in the RRSP later. Indeed, March would be a good time, after the RRSP hype subsides, to review how your previous RRSP investments have been preforming and perhaps change the investment products being used. Good financial planning will always leave

you options. Fredrick Petrie, author of “THE END OF

WORK: financial planning for people with better things to do”, practices financial plan- ning at Mortgage Logic, 1793 Portage Ave. (204) 298-2900

Smart Biz 7

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