How Long Do You Need to Keep Financial Documents?

 

We’ve all got that area in the basement or attic that contains stacks of boxes or totes that are filled to the brim with various financial records. You see them every time you go into that particular room, but you quickly avert your gaze to try and silence that nagging thought, “I really should go through those papers and get rid of some of those documents.” And if you have attempted to clean out those old boxes, many of you find yourselves struggling to determine what paperwork should be kept, and for how long?

How Long?

How long should certain records should be kept? The standard answer has always been “7 years.” But is that the case for all paperwork? The truth is: some documents only need to be stored for a short period of time, while other files should be stored for years. To begin the decluttering process, separate your paperwork into these four sub-categories. 

Current Documents include:

  • Bills, both paid and unpaid
  • Bank statements 
  • Credit card statements
  • Receipts for large purchases and income-tax receipts
  • Health, disability, life, auto, and home insurance policies

7-Year Documents include:

  • Income-tax records for the past 7 years including W-2s and any receipts relating to tax deductions
  • Bank statements for the past 7 years

Store Indefinitely Documents include:

  • Annual investment statements stating what was paid for mutual funds and stocks until they are sold along with IRAs and 401(k)s. 
  • Anything to do with your home including mortgage paperwork and any receipts for home improvements.
  • Major purchase receipts
  • Paperwork pertaining to your estate plan including copies of your will, trust(s), power of attorney, etc.
  • Warranties and instruction manuals for appliances
  • Insurance policies
  • Birth certificates, Social Security cards, and any legal paperwork pertaining to formerly owned properties. 

File 13 (trash can) Documents Include:

  • Receipts from credit cards unless you need to hold onto them for tax purposes such as a proof of business expense or as proof for a warranty claim. 
  • Statements from credit cards (unless you need them for tax purposes)
  • Old pay stubs
  • ATM receipts 
  • Receipts from utility bills (unless you need them for tax purposes)
  • Old quarterly investment statements (as long as you have your year-end annual statements_

Once you have everything sorted into the appropriate piles, it’s time to organize! To make it easier for someone else (or yourself) to find, keep all of your financial files in one place, with the most recent documents in the front. If you are scanning any documents, don’t forget to backup all of your files and keep that backup and your computer passwords in a safe place. Each January, schedule a time to go through the documents from the prior year and either file or get rid of them.

The main thing to remember as you go through this process is to keep your filing system simple. That way it will be easy to navigate and to find necessary documents at a later date. And do not ever throw away documents in the garbage or recycling bin without shredding them in some way to protect yourself from thieves who are looking to gain access to your personal information. 

Have questions about your Osiwala Financial Group paperwork and what you should keep vs. throwing away? We’re here to help. Contact our office at (248) 828-8000 or by clicking HERE