What records to keep? And how long?
Print and read this article once, then feel free to shred it.
Most papers can be touched once, and then tossed in the garbage like a hamburger wrapper.
Yet we all have some valuable identification records, financial statements, contracts or receipts that we ought to file and store in a safe place for easy retrieval later on.
Any victim of identity theft, fire, or flood will be glad for the time taken in advance to file and store critical records. And, if you’ve ever had to settle the estate of a friend or loved one, you’ll be relieved if you find official records in one, organized location.
Here’s a quick guide to evaluate what records you should keep — and for how long — when sorting through the growing amount of paperwork arriving each year:
Forever and ever
Starting backwards, here are some records you should keep forever:
- Birth, marriage, and death certificates.
- Adoption records.
- Divorce papers.
- Wills, living wills, and powers of attorney.
- Social Security cards.
- Property deeds and mortgage documents.
- Pension plan documents.
- ID cards and passports.
- Copy of 1040 tax returns.
- Life insurance policies.
- Vehicle titles and loan documents.
- Other legal papers.
- College transcripts.
- Accident reports, insurance claims.
- Inventory of safe deposit box contents.
Until sold or updated
These records should be kept until the property or item is sold or the account updated:
- Loan documents.
- Appraisals for jewelry, art, or other valuables.
- Warranty documents and receipts.
- Video of home contents in case of insurance claim.
- Year-end account statements to show the cost basis for investments on your taxes.
- Savings bonds and investment statements.
- Vehicle records.
- Medical bills until claims paid by insurance company; longer if you need medical expense deduction on your tax return.
Keep state and federal tax records and receipts for seven years, saving a copy of your 1040 tax return forever.
Keep documents showing home sale, purchase, or expenses for improvements for six years after you sell your home.
Retain those thank-you letters from charities, and also year-end investment statements, in the event you are audited by the IRS.
One year or less
Most of these records can be shredded after one year:
- Pay stubs and bank statements.
- Annually updated Social Security statements.
- Annual insurance policy statements.
- Annual retirement plan statements (401(k), 529, IRA, etc.).
- Bank deposit and ATM receipts until reconciled with your monthly statements.
- Credit card bills and statements. Longer if needed as proof of a charitable contribution or product warranty.
- Utility bills.
For your security, shred expired credit cards, visas, passports, and other identification.
Consider keeping at least two storage locations for your records:
- One for active files of less than three years to access quickly. This could be a home firebox or secure file cabinet located in a dry and safe spot.
- One for permanent hard copies that back up your home files. A credit union or bank vault is recommended. (Note: In some states, safe deposit boxes are closed at time of death, so keep a copy of your will in your home files or with a trusted relative or friend.)
Many people use a third location to store important records -– an external hard drive that’s password protected. Scanning and storing documents electronically is a great way to put lots of records into a tiny space, particularly if you regularly update the system.
Develop a habit of regularly filing your paperwork –- say, 20 minutes each week – to avoid accumulating a backlog of papers and cluttered desk. You’ll feel better knowing that critical records are available to you at a moment’s notice!