Financial Records: What To Save And What To Shred

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Learn how long you need to keep your financial documents.

We all tend to have a love/hate relationship with our financial documents. We love to keep them…but hate the clutter. The good news is that you can likely get rid of many of those documents you’ve lovingly saved over the years. Here’s an overview of what you should save and for how long.

Save for a month:

Generally, after one month you can shred checks, credit card receipts, credit card bills, retirement account monthly statements, and brokerage or mutual fund account monthly statements.

The exceptions:

Keep credit card bills, receipts or copies of checks that you’ll need for business or tax purposes—such as deductions or credits you’ll be claiming, including charitable contributions, home office expenses and family gifts. Also keep any brokerage or mutual fund account records that involve a transaction as you may need these for tax purposes.

Save for a year:

Keep your bank statements, annual retirement account statements, paycheck stubs, paperwork related to a sold vehicle (such as the bill of sale) and paperwork involving an insurance claim for one year.

The exceptions:

As with your credit card bills, you should keep bank statements that you’ll need for business or tax purposes. And if you need to apply for Medicaid one day, you may be asked for up to six years’ worth of bank statements. Retirement account records that include any roll-over or transfer information should be kept until retirement.

Save for six to seven years:

Your tax returns and all supporting documentation. The IRS can audit your returns for the past six years; and if you failed to file your return or filed a fraudulent return, there’s no time limit on a possible audit. As part of your supporting documents, you should keep records related to the purchase and sale of your home and any fees incurred in that purchase or sale, as well as any expenses paid toward permanent improvements. Also save any investment purchase or sale confirmations, which you may include as a gain or loss on your tax return.

The exceptions:

In this case, there are no exceptions! Keep all records related to your taxes or business for six to seven years.

Save indefinitely:

Save any paperwork related to loans, refinances or big-ticket purchases like jewelry, artwork or cars for as long as you have the loan or the item. Also keep all insurance policies for as long as you keep the policy and annual brokerage statements until you sell the securities. You should also keep your W-2 statements until you begin receiving Social Security benefits; these serve as proof of earnings if any questions arise.

Save forever:

Some paperwork you should never part with. This includes wills, trusts and powers of attorney, birth/death certificates and adoption papers, Social Security cards, marriage licenses and divorce decrees, paperwork related to legal filings or bankruptcy, and military discharge papers. Also keep any IRA contribution or withdrawal records.

Still drowning in paperwork? Clear the clutter with these organization tips.

This article contains general information. Individual financial situations are unique; please, consult your financial advisor or tax attorney before utilizing any of the information contained in this article.

Source: CBS Money Watch, Bankrate.com, New York Times, USAA.com, Money Girl
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