By Jill Schlesinger
Tribune Media Services
You probably just received some bank, investment or retirement quarterly statements in the mail, which makes it a perfect time to fire up the shredder and organize that stack of documents piling up on the table.
Here are some thoughts on financial paperwork that you can toss:
Bank statements: Generally speaking, you only need to keep bank statements for one year, BUT, if you think that you may be applying for Medicaid, many states require that you show five year’s worth of bank statements. Also, you should hold on to records that are related to your taxes, business expenses, home improvements, mortgage payments and major purchases for as long as you need them.
Credit card bills: Unless you need to reference something on your credit card statement for tax or business purposes, or for proof of purchase for a specific item, you can shred credit card statements after 45 days. As with the bank statements, hang on to those statements that you may need for your taxes, as proof of purchase or for insurance.
Tax returns/supporting documents: Despite being able to amend your tax returns going back three years, the IRS has seven years to audit your returns if the agency suspects you made a mistake, and up to six years if you likely underreported your gross income by 25 percent or more. As a result, you need to hold on to your returns and all supporting documents for seven years.
Retirement account statements (including 401(k), 403(b), 457, IRA, Roth IRA, SIMPLE, PSP and Keogh): Keep notices of any portfolio changes you make intra-month (or intra-quarter for some plans) until the subsequent statement arrives to confirm those changes. After making sure the statement is correct, you can shred away. One note: keep evidence of IRA contributions until you withdraw the money.
Brokerage and mutual fund account monthly statements/periodic trade confirmations (taxable accounts): Retain confirmations until the transaction is detailed in your monthly report. For tax purposes, flag a month where a transaction occurs because you may need to access this information in the future. Otherwise, shred monthly statements as new ones arrive, but keep annual statements until the sale of each asset within the account occurs and for seven years thereafter, in case you get audited.
Pay Stubs: Keep for one year, and be sure to match them to your W-2 form before you shred.
Medical Records: Given how hard it is to deal with health insurance companies, you should keep medical records for at least a year, although some suggest keeping records for five years from the time when treatment for the symptoms ended. Retain information about prescription information, specific medical histories, health insurance information and contact information for your physician.
Utility and phone bills: Shred them after you’ve paid them, unless they contain tax-deductible expenses.
Paperwork to keep for as long as you own the asset:
Appliance manuals and warranties: Keep these documents handy in case something goes wrong and you need to cash in on the warranty or contact a repairman.
Vehicle titles and loan documents: Do you want to wait in line for an hour at your local department of motor vehicles office in order to request a duplicate of your vehicle title? Me neither, so keep this paperwork in a safe and accessible place.
House and mortgage documents: Hang on to your deed as well as home purchase, mortgage, sale and improvement records until six years after you sell. Remember that improvements you make and expenses such as your real estate agent’s commission can increase the basis in your house and potentially lower your capital gains tax.
Insurance policies: Keep your homeowners, auto, disability and life insurance policies and declaration pages for as long as the policies remain in force. You can shred old policies.
Paperwork to keep forever (in a fireproof safe, on the cloud or in a safe deposit box):
- Birth/death certificates and Social Security cards
- Marriage licenses and divorce decrees
- Pension plan documents
- Copies of wills, trusts, health care proxies/living wills and powers of attorney (attorneys/executors should also have copies)
- Military discharge papers
- Copies of burial deeds and plots
- Safe-deposit box inventory
Jill Schlesinger, CFP, is the Emmy-nominated, Senior Business Analyst for CBS News. A former options trader and CIO of an investment advisory firm, Jill covers the economy, markets, investing and anything else with a dollar sign on TV, radio (including her nationally syndicated radio show), the web and her blog, “Jill on Money.”
She welcomes comments and questions at
askjill@jillonmoney.com.
This was printed in the September 8, 2013 – September 21, 2013 Edition
