It is easy to get into the habit of keeping every financial or investment document forever, just in case you may need it. But if your New Year’s resolution is to get your financial house in order, the following suggestions about how long to keep financial and investment documents may be helpful to you. Keep in mind, you should always check with your attorney and/or CPA if you have any specific questions regarding any documents. Any documents that you are discarding should always be shredded. Many towns and/or community organizations offer community shredding events.
Here are some suggestions about which documents you may want to shred, and what you might want to keep:
Income Tax Returns and Records
The Internal Revenue Service (IRS) has three years from your filing date to audit your return if it suspects good-faith errors. The three year deadline also applies if you discover a mistake in your return and decide to file an amended return to claim a refund. The IRS has six years to challenge your return if it thinks you underreported your gross income by 25% or more. There is no time limit if you failed to file your return or filed a fraudulent return. Thus, general wisdom is to keep all preparation documents for at least seven years, and to keep the actual returns permanently.
IRA Contribution Records/Retirement
Keep quarterly statements for 401(k), IRA, Roth IRA and other investment accounts until the annual summaries are received. If these are correct, then keep the annual summaries until you retire or close the account, and then shred the quarterlies. Also, if you made a nondeductible contribution to an IRA, keep the records indefinitely to prove that you already paid taxes on this money when the time comes to withdraw.
Insurance Policies
For property and liability policies such as homeowners, auto, or umbrella, you need to keep only the most current coverage summary page -called the declarations- and the most recent policy booklet. When the current declaration is replaced with new one, shred the old one. For individual life, health, disability and long-term care insurance, and other policies that are continuous until they are canceled, you should keep the policy papers and any amendments until the coverage ends or is canceled.
Brokerage Documents
It is a good idea to keep your monthly or quarterly brokerage statements until you have received the annual summary, which you can use to make sure that they match up. It is also a good idea to keep records of purchases and sales of securities (stocks, bonds, mutual funds, ETF’s) in case you need them for capital gains or losses calculations for tax purposes once you sell the securities.
Real Estate Documents
Keep all records of expenses incurred in selling and buying a property, such as legal fees and real estate commission for six years after you sell your home. The closing statement that you receive at settlement should suffice for this. You should also keep all records documenting all permanent improvements on the house, such as remodeling, additions, and installations. Holding on to these records is important because any improvements you make on your house can be added to the original purchase price (cost basis), thus lowering your capital gain when you sell your house. As for mortgage loan paperwork, keep the paperwork for a minimum of three years after the loan is paid off. You may want to keep the final mortgage satisfaction paperwork forever, in order to prove that the loan was paid off. There have been instances where the mortgage satisfaction paperwork was not recorded against the deed which caused problems when the property ownership is subsequently transferred.
Bank Statements
You should go through your checks once a year and keep those related to your taxes, business expenses, home improvements and mortgage payments. You can shred the others that have no long-term importance. If you bank online, you can save just the statements you might need down the road.
Bills
In most cases, when the canceled check from a paid bill has been returned, you can shred the bill. However, bills for big purchases, such as jewelry, rugs, antiques, cars, collectibles, furniture, computers, etc. should be kept in an insurance file for proof of their value in the event of loss or damage.
Credit Card Receipts and Statements
Keep your original receipts until you get your monthly statement and shred the receipts if the two match. Keep the statements for seven years if tax-related expenses are documented. If you get annual summaries of expenses incurred, you can shred the monthly documents. If you receive your statements online, you can just save the statements you might need down the road.
Paycheck Stubs
Keep your paycheck stubs for one year. When you receive your annual W-2 or 1099 from your employer, make sure the information on your stub matches. If it does, then shred the stubs.
Official Personal Documents:
Physical copies are needed for these items:
o Birth Certificate Passport
o Citizenship Papers Death Certificate
o Custody Agreement Social Security Card
o Deeds and Titles Marriage License
o Military Record
Estate Planning Documents
Physical copies of these documents are needed so they need to be retained permanently or until a new document is signed.
o Wills Health Care Directive
o Trusts Living Will
o Power of Attorney
Disclaimer:
While this article may concern an area of investing or investment strategy in which we supply advice to clients, this document is not intended to constitute a complete description of our investment services and is for informational purposes only. It is in no way a solicitation or an offer to sell securities or investment advisory services. Any statements regarding market or other financial information is obtained from sources which we and/or our suppliers believe to be reliable, but we do not warrant or guarantee the timeliness or accuracy of this information.
Past performance should not be taken as an indicator or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. As with any investment strategy or portion thereof, there is potential for profit as well as the possibility of loss. The price, value of and income from investments mentioned in this report (if any) can fall as well as rise. To the extent that any financial projections are contained herein, such projections are dependent on the occurrence of future events, which cannot be predicted or assumed; therefore, the actual results achieved during the projection period, if applicable, may vary materially from the projections.
Sources:
https://www.consumerreports.org/taxes/how-long-to-keep-tax-documents/
https://www.consumerreports.org/cro/news/2014/04/paper-shredders-aren-t-as-secure-as-you-might-think/index.htm
https://www.bankrate.com/finance/insurance/old-insurance-policies-can-be-tossed.aspx
https://lifehacker.com/5994409/how-long-should-i-keep-old-documents
http://www.finra.org/investors/save-or-shred-how-long-you-should-keep-financial-documents