Bills for utilities, cable, and phone: Toss the banknote once you’ve determined it’s right. However, if you plan to deduct some of these expenses on your tax return, you’ll want to keep track of them (more on that in a moment).
Credit card statements: You generally don’t need to preserve this if you know all the charges are correct. However, if you make a large purchase and your lender provides product protections, keep that month’s payment. Also, save any deductible purchases on your bill for your tax return.
Medical bills: You probably don’t need to save these until you know your claim has been reimbursed by your health insurance company. Keep the bills if you’re planning to deduct medical expenses on your tax return.
Monthly/quarterly account statements: Save your investment and retirement account statements until you get the year-end statement, which recaps the preceding 12 months. There’s no need to keep the monthlies once you’ve determined that it’s correct.
Bank statements: Once you’ve verified that your monthly statement is accurate, you can discard it at the end of the year. Keep your check if you used it to pay for a significant or deductible item.
Pay stubs: If you still get them, throw them away after reconciling them with your W-2 at the end of the year. However, if you want to apply for a mortgage, your lender may require a few months’ worth of bank statements.
To hold for longer
Tax Returns: If Uncle Sam has questions about your tax returns, you don’t want to be missing tax-related documentation. Keep the tax returns and accompanying papers for a minimum of seven years. The IRS can audit you three years after you file a tax return, or six years if it believes you failed to record your income by at least 25%.
Year-end account statements: These will show you your investment’s cost basis, so save them for as long as you own the investment. (And then some more to back up your tax return.)
Keep your annual retirement plan statements for as long as you have funds in the accounts. This will ensure that your future withdrawals are taxed correctly. This is especially crucial if you want to show if you’ve put money into your 401(k) before or after taxes, and if you’ve saved for both standard and Roth alternatives. Keep Form 8606 the record that demonstrates whether your IRA contributions were deductible or not deductible for your IRAs.
Documents pertaining to the home: Keep all of your purchase documentation, as well as any home improvement records, because they can be used to calculate your cost basis when you sell your property, potentially saving you thousands of dollars in taxes. Keep records of any work that required a permit or a town inspection for as long as you own your home.
Keep your insurance plans for home/renters insurance, auto insurance, and umbrella insurance for the entire year. Toss the old one when you get a renewal. Keep your life, disability, and long-term care insurance as long as it’s valid.
To hold indefinitely
Keep all of your loan documents and contracts as long as you’re still paying off a loan (vehicle, home, student loan, etc.). The lender will offer you a payoff statement when you pay off the loan. Keep this for the rest of your life, just in case a zombie debt comes back to bite you.
The key stuff: While you can replace the documents below, it will be a tremendous pain. Invest in a firebox or a safety deposit box for the following reasons:
- Jewelry, art, and other precious property appraisals (unless you sell the item)
- In the event of a home fire, a recording of your home’s contents can aid insurance claims. This should be updated once a year.
A few thoughts on e-documents
You can download account statements and preserve the electronic versions if you prefer digital to print, but make sure they have a home outside of your hard drive.
You must ensure that you have access to your papers if your computer ever displays the dreaded blue screen of death.
You claim, however, that you can access previous statements using your online accounts. True, but do you really want to have to track down all of that? Furthermore, not all online accounts provide indefinite statements, so it’s best to be safe than sorry.
Rather, invest in an external hard drive and back it up on a regular basis to ensure you have everything you need.
Part 2 of How Not To Fail At Wedding Planning: The Things People Overpay For
When it comes to monthly bills, how long should you retain them?
It’s acceptable to shred and discard anything after one year, with one exception: anything that documents a tax deduction must be maintained for at least three years.
I’m not sure how many years of old bills I should save.
Knowing this, it’s a good idea to keep any document that validates information on your tax return for three to seven years, including Forms W-2 and 1099, bank and brokerage records, tuition payments, and charity donation receipts.
How long should bank statements be kept?
Your bank and credit card statements give you clear and detailed information about what’s going on with your accounts. It can also serve as important supporting proof if your finances are ever questioned.
Examining statements can aid in the detection of fraud and other abnormalities, such as an unusually high bill. Keep them for as long as you need them to assist with tax planning or fraud/dispute resolution. Also, if you’ve utilized your statements to back up information on your tax return, save your files for at least seven years.
What kinds of personal documents should be retained indefinitely?
We’ve looked at documents that can be thrown away after a certain period of time, but there are lots more records that you should save forever. The following are important documents to keep for the rest of your life:
You should keep the documentation for whatever you’ve bought or insured for at least as long as you own it or until the warranty expires. However, just to be safe, it wouldn’t harm to keep them around for a little longer. This contains documents such as titles, deeds, insurance policies, warranty paperwork, and more.
Health insurance policies and related documentation should also be kept for the long term. You should retain these data as long as your health insurance is active. If your insurance coverage has expired or you’ve switched to a new provider, toss the papers after you’re certain you won’t need it. The same is true if you get unemployment or disability payments. Keep the paperwork until you’re sure you don’t need it anymore.
Err on the side of caution if you have financial records or documents you’re not sure you’ll need. Keep any documents you don’t think you’ll need until you’re sure you won’t.
What records do I need to retain, and how long do I need to keep them?
According to Weltman, dividing your financial records into four categories is a smart place to start.
Keep it for no more than a year. Weltman recommends storing ATM, bank-deposit, and credit-card receipts until you reconcile them with your monthly accounts in this file. If you don’t need the paper papers or electronic data to support your tax return, shred them or securely discard them. Until fresh insurance policies and investment statements arrive, keep them.
Keep for at least a year. Keep all loan documentation until the loan is completely paid off. This is usually for a period of more than a year. Keep the title if you own a car until you sell it. Keep purchase confirmations until you sell stocks, bonds, or mutual funds, for example, so you can determine your cost basis and holding duration, according to McBride.
Keep it for at least seven years. The government has six years to collect the tax or file legal action if you fail to record all of your gross income on your tax filings. To be safe, maintain all tax records for at least seven years, according to McBride.
Keep indefinitely. Birth and death certificates, marriage licenses, divorce decrees, Social Security cards, and military discharge papers should all be retained for as long as possible. Keep any defined-benefit plan documentation, estate-planning documents, life insurance policies, and a list of what’s in your bank safe deposit box on hand as well.
When it comes to bank statements and canceled checks, how long should you retain them?
If a bank does not return canceled checks to its customers, the canceled checks, or a copy or reproduction of the checks, must be kept for five years. There are some exceptions, such as for certain types of $100 or less checks.
Within a reasonable time after receiving your request, the bank must furnish you with a copy of any canceled check. For this service, the bank may charge a fee.
Is it possible to obtain bank statements dating back ten years?
Make a request for your past statements at your bank. Give them the from and to dates, and they’ll tell you when the records can be mailed to you. They might be able to send you electronic records via e-mail or PDF.
You can use a timetable or timeline to ensure that you stay organized with what records to save and what you should shred after you file your taxes each year.
Compare your pay stubs from the previous year to your W-2s when filing your taxes, and monthly brokerage statements to your 1099s in the same way. Shred the stubs and statements after you’ve filed your return.
Shred old tax return forms, W-2s, 1099s, K-1s, canceled checks, charitable contribution receipts, and other information utilized in previous taxes three years after filing.
While it’s not advised, if you fail to disclose more than 25% of your total income on your tax return, keep those W-2s, 1099s, and other tax paperwork for 6 years in case of an IRS audit.
Shred old tax documents for closed retirement accounts (such as IRAs) and losses from worthless securities or bad debt deductions after 7 years.
Is it necessary for me to maintain my mortgage statements for a certain amount of time?
Any paperwork related to your refinance should be kept for at least three years, much as your mortgage payment statements. Although some experts may advise storing it for at least ten years.