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Excess accounts, like excess pounds, can be a symptom of aging

Just as people hoarding clothes and ashtrays from skinnier and smokier days, many people with investment accounts opened decades ago and gathering dust should have a garage sale.

Close an account that's nearly empty, combine portfolios with similar holdings, and don't maintain that sentimental but inactive mutual fund account because it made you money decades ago.

Tax time is a great time to evaluate your investment accounts. - Submitted photo

Edmonton -

Just as people hoarding clothes and ashtrays from skinnier and smokier days, many people with investment accounts opened decades ago and gathering dust should have a garage sale.

Close an account that's nearly empty, combine portfolios with similar holdings, and don't maintain that sentimental but inactive mutual fund account because it made you money decades ago.

I've just finished filing income tax returns for one senior couple, where the wife has - count 'em up -10 Registered Retirement Income Funds, while her husband has seven RRIFs, plus eight T3 and four T5 investment slips.

Another tax client, a hoarder-in-training, has six RRIFs, as well as eight T5s and two T3s.

Besides having an ulterior motive of wanting to reduce my workload in data inputting, I have suggested they consider consolidating many of their accounts for various reasons.

One purpose is just to reduce the quarterly statements and year-end tax slips they will receive, to better keep track of what they own and where it is.

Last year I told a client he had given me only half as many T5 slips as he had the previous year, and I wondered if he had sold the other investments, if they had merged or become private companies, or just what had happened. The lovable gent looked at a kitchen drawer and said: "I found another. Oh wait, here's eight more."

In the end, he had four RRIFs, six T3 slips and 24 T5 slips - an unofficial Tax By Turk record - from a variety of non-registered accounts. His response: "I don't remember making all that money." Or spending it, probably.

Numerous T3s and T5s are merely a sign of having many non-registered holdings, which is likely a good thing if registered retirement savings plan contribution room was used up along the way. But as people get older, their waistlines and number of investment accounts tend to expand.

Sometimes spouses or partners just never get around to consolidating accounts started while single. Sometimes people move and start new accounts in their new location, without transferring their old accounts. Sometimes people are talked into starting new accounts by financial advisers looking for ways to add income.

There can be good reasons for spreading money in different types of accounts. The Canadian Deposit Insurance Corp. insures each type of account for $100,000 in case a member financial institution fails, but the death of Donald Cormie in February reminded us his Principal Group was one of the last significant financial institutions to go into receivership in Canada, and that was back in 1987.

Accounts may be kept separate for money that is inherited, or to keep investments out of the hands of a spendthrift or someone with an addiction like gambling. And having accounts in more than one institution can make it easier to shop for higher investment interest rates - major banks will usually match each other's rates if you ask - and make it easier to bargain for lower loan interest rates.

But having a number of investment accounts can be costly, with various administration fees and service charges. I've seen people with identical holdings in each of three accounts - one belonged to her, one to him, and one was 83 per cent his and 17 per cent hers.

And there can be headaches. One client had five RRIF accounts, and when the stock markets collapsed, the federal government allowed a one-time recontribution of up to 25 per cent of minimum 2008 RRIF withdrawals, until March 1, 2009. The client wound up with three RRIF account recontributions made in 2008, one receipt for that year issued after the April 30 tax deadline, and another receipt issued for 2009.

Besides avoiding confusion, having fewer accounts is important in doing financial planning, when you need to look at the overall picture of what types of assets and sectors are invested in. One adviser can put you into particular assets in one account, unaware you already have them in them in other accounts.

The traditional 40-60 spread between bonds and equities may make no sense if you have another account predominantly in one type of investment.

Recent changes in investment regulations and vehicles have also affected where people hold their money. Pension-income splitting has reduced the need for spousal RRSPs in many cases, unless you want to withdraw money before age 65. And the Tax-Free Savings Account is a good place to accumulate money from various non-registered accounts, and from in-trust accounts for children when they turn 18.

Just as investors should review what's in their portfolios every six or at least 12 months, they should also examine their accounts periodically.

If you've had no contributions or withdrawals from an account for a year, except for investment income being added, do you need it?

Consider combining accounts with multiple financial institutions into a self-directed plan with one. If you have an amount less than $1,000, you can probably combine it with another account.

As people get older, they should try to simplify their financial holdings, rather than spread them out and make them difficult to track and maintain.

And like having a regular garage sale, consider giving any financial leftovers you don't have a pressing need for to charity.

Organizations: Canadian Deposit Insurance, Principal Group

Geographic location: Edmonton, Canada

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