At least once each year you should sort through the clutter of your financial records. Here are some tips to help you decide which ones should stay and which ones should go. Remember, many of these records can be retained electronically now.
Keep:
- Bank statements and cancelled checks for seven years
- Brokerage trade confirmation slips and notices of stock splits, mergers and buyouts
- Home ownership records – including major home improvements – as long as you own the home
- Current insurance policies; terms and conditions for credit card accounts and loans
- Year-end statements for your investments and retirement accounts
- Keep employment tax records for at least 4 years after the date that the tax becomes due or is paid, whichever is later.
- The Statute of Limitations that apply to income tax returns and supporting documents such as W2s is generally three years. However, a longer Statute of Limitations applies (and the corresponding file retention policy in the following situations):
- Seven years if you file a claim for a loss from worthless securities or bad debt deduction.
- Six years if you do not report income that you should report, and it is more than 25% of the gross income shown on your return.
- Indefinitely if you do not file a return.
- Indefinitely for fraudulent returns.
Shred and Throw Out:
- Bills you have paid
- Pay stubs (just keep the two or three most recent if applying for a mortgage)
- ATM receipts after you match them with bank statements
- Monthly investment statements once you receive your year-end statement
- Credit card statements once you pay them, unless you need them for tax records
- Quarterly and transactional- confirmation statements for your investment and retirement accounts.
