As an adult, you quickly learn that life seems like one long paper trail. You have to deal with everything from tax returns, mortgages, and student loans to bank statements, insurance policies, brokerage statements, and more. You might feel buried or overwhelmed by all of them, even if many of your documents are digital.
With so many years and types of financial records in your name, you might be wondering which ones you need to keep and for how long. Before you hit delete on those digital files or break out the paper shredder, it’s important to know whether you might need them down the line.
Some records can be discarded, while others should be held onto forever. In this guide, you’ll learn how long you should keep your financial documents.
The Keep Forever Pile
Very few people cherish the memory of paying taxes. However, your tax return is the first financial document to place on your “keep forever” pile. It’s an important record that tells your financial history.
And if you’ve had any filing amendments, keep those too. Indeed, records of payments to the government or any other major financial events, such as legal filings or inheritances, should also be retained throughout your life.
Beyond your tax returns, here’s a list of financial documents to keep forever:
- Mortgages and other loans
- Life insurance policies
- Pension and retirement plans
- Paperwork on expensive items
You can get rid of mortgages and other loans, such as student or auto loans, once they are paid off. But it’s a good idea to keep them indefinitely in case it’s ever disputed you paid them. Also, keeping receipts and other paperwork on jewelry, electronic equipment, and expensive art can help with an insurance claim if anything is damaged or stolen.
Keep for Three to Seven Years
The IRS might ask you for documentation from three to seven years after you’ve filed your taxes. If you hold onto your supporting tax records, such as your W-2s or 1099s, you’ll be ready. This also includes bank and brokerage statements and records of tuition payments and charitable donations.
Consider keeping any records about property purchases for six years. You must also wait six years before discarding documentation of substantial improvements and records related to buying and selling property, like legal fees. Such documents will be used to calculate your capital gains and should be kept in case you’re audited later.
Maintain These Records for a Year or Less
You can keep your monthly bank and credit card statements around for a year before disposing of them. Depending on when you do your taxes, you only need to keep your pay stubs for a year as well. Have your pay stubs long enough to compare them to your W-2 and make any claims about your pay if you find a discrepancy.
Your utility, television, and cable bills can be retained until your monthly payment has been processed. However, if you’re self-employed, these documents become part of your tax records and should be stored with your tax documents. Bank withdrawal and deposit slips can go after you’ve checked them against your monthly bank statement.
How to Maintain Your Financial Documents
Knowing which financial records to keep and being able to access them easily can go a long way toward building your confidence in your financial situation. Consider developing a records retention plan before a stack of papers grows on the end of your dining table.
Your plan for dealing with your financial documents can keep your dining room table clear for weekend gatherings, keep your financial information safe from prying eyes, and protect documentation you may need in a dispute. You can create a simple plan that takes these three steps:
- Back up and Store Your Information: Organize, copy, and place files where they can’t be damaged or stolen, backing up digital files
- Set Strong Passwords: Create complex passwords for online records and financial portals
- Dispose of Old Records: Shred both digital and paper records you no longer need
Properly maintaining and disposing of your financial documents can help you prepare faster if a dispute arises and safeguard against identity theft.
Talk to a Financial Advisor
Now, you may have a better idea of what to do with the financial documents you regularly accumulate. But you can always ask a financial advisor at Good Life Morehead City to walk you through handling your records.
We work closely with you to understand your goals and deliver personalized service. If you want to know more about financial records or discuss financial planning, reach out to us today with your questions.