- What do I need to keep?
“Do I need to keep my bank statements?” I am frequently asked this question.
Most of the documents that we need to hold on to revolve around three things: taxes, our identity, and ownership.
Here I briefly summarize the documents that you want to retain, organized by the length of time to keep them.
Items you want to keep indefinitely are:
- Federal and state tax returns
- Originals of vital records such as birth certificates, marriage licenses, divorce decrees, military discharge papers, and adoption and naturalization papers
- Medical records
- Social security cards – memorize your number and put your card in a safe deposit box
- Receipts for capital improvements made to your home – retain until seven years after you sell your house
- Whole life insurance policies
- Estate planning documents such as wills, trust agreements, power of attorney documents, and advance directives
Keep every scrap of paper that supports your tax return for seven years after you file. The IRS has three years to audit you. If it suspects that you underreported income or that you committed fraud, it has six years from when you filed your return to pursue an audit.
Tax documents include proof of income such as W-2s, 1099s, K-1s, alimony, and brokerage statements that show capital gains and losses. They also include verification of deductions: property tax bills, receipts from charities, proof of mortgage interest paid, and bills and statements that support medical, home office, and other deductions.
Some documents you want to keep until you no longer own the item or asset. These include:
- Proof of ownership of securities, original stock certificates, and bonds – when you sell, transfer your records to your tax documents and hold for seven years
- Annual brokerage and retirement account statements
- Pension plan documents
- Term life insurance policies
- Long term care insurance policies
- Automobile, boat and other vehicle titles
- House and property deeds
- Loans
- Receipts that support warranties
Papers that you can discard after a year:
- Bank statements – keep until your 1099 arrives in January
- Paycheck stubs – use these to check the accuracy of your annual W-2
- Monthly and quarterly brokerage statements – retain any document that shows a purchase, gain or loss
- Home, auto and other insurance policies that renew every year – when the new policy arrives, pitch the old one
- Health insurance “explanation of benefits” (EOBs) – compare these to your medical bills to verify that they are accurate
If you have Medicare, you may want to keep your explanation of benefits two to three years. Medicare can be slow to process claims. Some of my clients have been billed for medical services received 14 months prior to date on the invoice.
Papers that you can keep for a month or less:
If you are uncertain whether to keep a document, ask yourself these questions:
- Can I identify a specific event where I might need this document? If no, consider getting rid of it. If yes, ask:
- Can I get this document again? How much time, expense and effort are involved in obtaining a duplicate? If it is difficult or expensive to replace, hold on to it.
- Is this document periodically updated? If yes, save only until the update arrives.
- Is this document itself valuable? If yes, put it in a safe place.
When you throw out any paper document, I recommend that you shred it. This will help keep your personal information out of the hands of identity thieves.
Where to store your records is a topic for another column. However, I want to mention here that if you save any documents electronically, it is important to regularly back them up to secure, external storage. You don’t want to lose them if your computer crashes.
nally convinced me to give an online bank a try. I wanted to earn interest on my cash savings. I wanted my money to be safe and liquid so I can access the funds quickly without penalties.
By Jennifer R. Luitjens, Esq.
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