A frequently asked question in the retirement industry is, how many accounts should I have at retirement? Should I have a savings account, an investment account and a pension account, or should I have multiple accounts for multiple purposes in multiple places?

I think the question often arises from being told over and over to be diversified in our investments and not to have all our eggs in one basket, meaning that we should spread our money and assets with many companies as opposed to just a single firm. The reasoning behind this is that if something does happen, it will not cause financial ruin. It will only cause mental irritation.

However, financial events do occur occasionally whether they are preventable or not. I am sure we can all think of a relative or neighbour who talked about how they lost money because they did not research the company they were investing with.

So, how many accounts should you have to protect you from life’s unexpected events, and does that number change over time?

In practical terms, the more accounts you have, the more fees you pay and the more you have to keep track of. Most people with whom I speak with have accounts in one or two banks. They have several savings and chequing accounts, two investment accounts, perhaps even a brokerage account and then on top of that, there is the company pension plan. This could amount to seven different products in at least four different places where your money is stored, invested or accumulated. This means that you have to research four places to compare their products and fees to ensure you are getting good bang for your buck.

In our family, we tried to keep it simple, two accounts in one bank which include savings account and an investment account that can hold a variety of investments and the only other accounts are our company pension plans. For us, this works. I can log in to online banking and see everything straight away with no need to remember which password is for what. With our company pensions, since it is the company’s decision as to who is the pension administrator, there is not much that can be done. However, making sure we have online access certainly makes things easier to track.

As we mature and get closer to retirement, and in retirement, we should start streamlining our assets and consolidating our accounts. Having two bank accounts, an investment account and a pension account would be considered the norm. It is important when you start to consolidate your accounts that you make sure to select the right financial institution that can service your needs and grow with you as you get older.

Once you have completed your consolidation, then you should see whether you can reduce your fees and perhaps get better interest on your consolidated balances in your accounts.

Lastly, after you have consolidated; from an estate planning perspective I recommend that you create a document that you can attach to your will showing how many accounts you have and where they are located. This means that if something does happen to you, your family does not need to go on an exploratory Indian Jones mission to locate all of your finances.

– Carla Seely is the Vice President of Pension, Life and Investments at Freisenbruch. If you would like any further details, please contact her at cseely@fmgroup.bm or call +1 441 297 8686.