Some can be disposed of after a month; others you should hold on to indefinitely.
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Is there a rule of thumb on how long someone should keep their financial documents? I have filing cabinets filled with receipts, bank statements and tax returns I would like to toss.
As we get older and our financial lives become more complicated, it can be challenging to know how long to keep financial records and paperwork and when it is safe to dispose of them. Some documents will need to be kept for your lifetime, while others can be discarded after just a month. Here is a checklist that can help you determine what to save and what you can throw away.
Keep One Month
- ATM receipts and bank deposit slips can be thrown out as soon as you match them up with your monthly bank statement.
- Sales receipts can be tossed after you get your bank or credit card statement. However, keep these longer if you plan to return the item or need proof of purchase for a warranty.
- Credit card statements can be discarded once you review your statement unless there are tax-related expenses on them.
- Utility bills should be saved until the following month’s bill arrives showing that your prior payment was received. If you track utility usage over time, keep your bills for one to two years. If you claim a home office deduction, keep them for three years.
- To avoid identity theft, be sure to shred anything you throw away that contains your personal or financial information.
Keep One Year
- Paycheck stubs until you receive your W-2 form in January, to check its accuracy
- Bank statements (savings and checking accounts) to confirm your 1099 forms
- Brokerage, 401(k), IRA and other investment statements until you get your annual summary (keep longer for tax purposes if they show a gain or loss)
- Receipts for health-care bills in case you qualify for a medical deduction
Keep Three to Seven Years
- Supporting documents for your taxes, including W-2s, 1099s, and receipts or canceled checks that substantiate deductions. The IRS has a period of three years to conduct an audit after you file a tax return. However, that period may be extended to six years if they suspect you substantially underreported income. Keep documentation for seven years if you claim a loss from worthless securities or a bad-debt deduction. If a tax return was not filed or a fraudulent return was submitted, the IRS has an indefinite period to pursue collection.
Keep Indefinitely
- Tax returns with proof of filing and payment. You do not have to keep them forever, but many people do since they provide a record of their financial history.
- IRS forms you filed when making nondeductible contributions to a traditional IRA or Roth conversion
- Retirement and brokerage account annual statements
- Defined-benefit pension plan documents
- Savings bonds until redeemed
- Loan documents until the loan is paid off
- Vehicle titles and registration information if you still own the car, boat, truck or other vehicle
- Insurance policies
- Warranties or receipts for big-ticket purchases to support warranty and insurance claims
- Personal and family records like birth certificates, marriage licenses, divorce papers, Social Security cards, military discharge papers, and estate planning documents including powers of attorney, wills, trusts and advanced directives. Store these important documents in a fireproof safe or in a safe deposit box.
Digitize Your Documents To reduce your paper clutter, consider digitizing your documents by scanning and converting them into PDF files so you can store them on your computer and back them up on a cloud storage service. You can also reduce your future paper load by switching to electronic statements and records whenever possible.
“Savvy Living” is written by Jim Miller, a regular contributor to NBC’s “Today Show.” The American Legion’s Office of Fund Development offers ways to establish your legacy of support for the organization while providing for your current financial needs. Learn more about the process, and the variety of charitable programs you can benefit, at legion.org/plannedgiving. Clicking on “Learn more” will bring up an “E-newsletter” button, where you can sign up for regular information.
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