Guidelines for Keeping Financial Records

Many people have their financial documents scattered all over the house – on the kitchen table, in stacks of old newspapers, the hall closet, the basement, the garage. This type of “organization” makes it difficult, if not impossible, to keep tabs on your finances.

Sorting and filing financial papers is no one’s idea of fun. Fight the urge to procrastinate and make the time to put things in good order. The financial professionals who work with you will be better able to advise you if they have accurate and up-to-date information. When you pass away, your loved ones will have an easier time locating the important documents needed at that time. One large file cabinet may suffice for storage. Some prefer a few storage boxes or stackable units. Whatever you choose, here is what you should keep: 

  1. Investment statements. Organize by type: IRA statements, 401(k) statements, mutual fund statements. Keep the annual statements and discard the others. For an IRA or 401(k), keep Forms 8606 (reporting nondeductible contributions), Forms 5498 (the “Fair Market Value Information” statements that your IRA custodian sends you each May), and Forms 1099-R (reporting IRA distributions). Keep records of your original investment in a fund or a stock to help determine capital gains or losses later.
  2. Bank statements. Keep the last three years of bank statements. Under certain circumstances (lawsuit, divorce, past debts) you may need more than three years worth.
  3. Credit card statements. Keep statements showing tax-related purchases for up to seven years
  4. Mortgage documents, mortgage statements and HELOC statements. Keep mortgage statements for as long as you own the property plus seven years. For other mortgage documents, keep them for the ownership period plus ten years.
  5. Annual Social Security benefits statement. Keep the most recent one. It shows your lifetime earnings record. If you see an error, you will need your W-2 or tax return for the particular year to help Social Security correct it.
  6. Federal and state tax returns. Keep three years of federal (and state) tax returns and supporting documentation, and keep them as long as seven years to be really safe. Keep tax records pertaining to real property as long as you own the asset (and for at least seven years after you sell, exchange or liquidate it).
  7. Payroll statements. If you own a business or are self-employed, keep your payroll statements for seven years or longer.
  8. Employee benefits statements. Keep at least the most recent year-end statement.
  9. Insurance. Life, disability, health, auto, home …keep the policies and policy information for the life of the policy plus three years.
  10. Medical records and health insurance. Keep these documents for five years after the medical treatment. If you deduct medical expenses on your federal return, keep them for seven years.

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  1. Wake-up Call says:

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