Financial Record-keeping: What to Keep and What to Shred

Ken Weingarten |
Categories
Financial Records

As important financial paperwork piles up over time, a major question arises, “Should I shred this?” This is a delicate issue as there is the possibility that one may discard something that should have been kept.

While our clients have access to their own online portal to store these documents indefinitely, there is the paper trail that one still has to deal with. In an effort to reduce physical clutter and avoid the threat of identity theft, storing documents electronically is a prudent step to maintain a financially-organized household.

There are widely-accepted guidelines for how long certain documents should be kept for. Below we will go over which documents fall into which length of time before discarding.

One-Year Documents

  • Bank Statements
  • Paycheck Stubs
  • Cancelled Checks
  • Quarterly Retirement Plan Statements
  • Auto and Homeowner Policies
  • Credit Card Statements
  • Credit Reports

Three-Year to Six-Year Documents

  • Individual Income Tax Returns and Supporting Documents (One can be audited by the IRS for no reason up to 3 years after timely filing a tax return. In addition to this, the IRS look-back period for audits can be extended up to 6 years if gross income is underreported by 25%)
  • Business Tax Returns (6 years from the date filed)
  • Property Records and Improvement Records (Keep for 3 years after related tax return filed)
  • Medical Bills (In the event of insurance disputes)
  • Accident Reports and Claims

Documents to Keep Forever

  • Vital Certificate Records (Birth, Death, Marriage, Divorce, Adoption, etc.)
  • Legal Documents (Wills, Power of Attorneys, Advanced Health Directives, Trusts, etc.)
  • Retirement & Pension Records
  • Income Tax Returns (It is still a good idea to keep records of previous return after the 3-6-year IRS look-back period. Electronic storage can ensure it is archived properly and simultaneously reduce physical clutter.)
  • Investment Confirmations & Statements

Active Documents (The following documents are unusual in the sense that they do not fit into the above categories)

  • Vehicle Records (Keep until said vehicle is sold)
  • Insurance Policies (Keep for the life of the policy i.e. Life, Disability, LTC)
  • Passports (Once their 10-year period expires, the renewal process requires that the old passport be mailed to the State Department)
  • Sales Receipts (For warranty purposes)
  • Loan Documents (For the life of the loan)
  • Username/Password for All Online Accounts (Not only should this be safeguarded but it can help you keep track of this information)

Everything considered, electronic storage can eliminate the need of keeping track of when to discard documents. Once scanned in, electronically-stored documents are not only more secure but provide a more efficient and accessible way of accessing these archives. Client are encouraged to utilize their portals to easily store important documents.

Weingarten Associates is an independent, fee-only Registered Investment Advisor in Lawrenceville, New Jersey serving Princeton, NJ as well as the Greater Mercer County/Bucks County region. We make a difference in the lives of our clients by providing them with exceptional financial planning, investment management, and tax advice.