By Jill Schlesinger
It’s a happy coincidence for clean freaks like me that the height of tax season occurs as spring begins. The very moment when you are forced to gather and organize your tax materials is a great time to clean up some of those overflowing and physical files and to understand in which instances you can consolidate various accounts.
Let’s start with the easy stuff. Here’s how long you need to hold onto various documents:
Tax returns
Generally, the IRS can include returns filed within the last three years in an audit. If they identify a substantial error, they may add additional years, but the agency usually does not go back more than the last six years. Therefore, keep your returns and all supporting documents for six years. If you work with a tax preparer, ask whether they will maintain electronic copies of all returns filed.
Physical and electronic bills
— Bank/Investment statements: Keep for one year and for taxable investment accounts, flag purchase and sales confirmations for tax purposes. (Note: If you think that you may be applying for Medicaid, many states require that you show five years’ worth of statements.)
— Home improvements/major purchases: Until you dispose of the asset.
— Credit card bills: Unless you need to reference something for tax or business purposes, or for proof of purchase for a specific item, you can shred them after 45 days. Flag and keep what you may need for taxes, like charitable contributions.
— Utility and phone bills: Shred after payment unless they contain tax-deductible expenses.
Keepers:
— Birth and death certificates
— Social Security cards
— Marriage licenses and divorce decrees
— Estate documents
Spring account maintenance
Do you have orphan investment or bank accounts that need attention? By combining them, the resulting higher balance may help avoid or reduce fees and even nab you get better deals, not to mention, it will help streamline your financial life. If you are stashing your emergency reserve in a traditional commercial bank, check out some of the higher yielding options online, which are likely to pay higher rates of interest.
Given the job changing that’s going on, you may have a few different retirement accounts that are floating around. If you have a new employer that offers a retirement plan that is inexpensive, consider rolling old plans into the current one.
If not, consolidate old plans into one IRA Rollover account at a firm that offers cheap index funds. Combining accounts makes it easier to monitor your entire portfolio and ensure that your money is properly diversified. Also, while the convenience of mobile payment apps is great, balances earn no interest, which is less than even the stingiest of banks. Move balances into accounts that can earn something.
— Streamline your streaming: During the pandemic, many of us loaded up on streaming services. I, for one, really needed that Acorn subscription to binge some of my favorite British crime dramas!
Now, it makes sense to slim down on those extra subs as we find more to do out of the house. Use extra savings to pay down debt, beef up savings, increase retirement or investment account contributions, or pay for the higher cost of gas!
— Check your credit: Over the past decade, credit scores have been rising. According to Experian, in 2011, the average FICO score was 689 and as of last year, that number was 714.
A credit score of 700 or more is generally considered good — and helps borrowers secure lower interest rates for loans. To make sure that loan payoffs are properly recorded and that you are getting the best interest rates on your loans, check your credit for FREE at AnnualCreditReport.com.
Jill Schlesinger, CFP, is a CBS News business analyst. A former options trader and CIO of an investment advisory firm, she welcomes questions at askjill@jillonmoney.com. Check her website at www.jillonmoney.com.
