Financial spring cleaning: Time to purge
To begin, make sure you have access to an adequate shredder. You should also buy a fireproof safe for your home in which to store important documents. While bank safe deposit boxes can be useful, remember that they are only accessible during branch operating hours, and some of your documents could require immediate access.
Paperwork that you can toss:
Bank statements: It may surprise you, but experts say that you only need to keep bank statements for one year. For those who keep the random ATM deposit and withdrawal slips, stop making yourselves crazy! Make sure that the ATM transaction is reflected on your bank statement, and then get rid of it. One caveat: to qualify for Medicaid, you may be asked for up to six years of bank statements.
Credit card bills: Unless you need something on your credit card statement for tax or business purposes, or for proof of purchase for a specific item, you can shred it after you have paid it, or when the next statement arrives.
Retirement account statements (including 401(k), 403(b), 457, IRA, Roth, SIMPLE, PSP and Keogh): Unless you feel compelled to review your month-to-month progress, you can shred these statements as new ones arrive. Keep notices of any portfolio changes you make intra-month until the subsequent statement arrives to confirm those changes.
Brokerage and mutual fund account monthly statements/periodic trade confirmations (taxable accounts): Retain confirmations until the transaction is detailed in your monthly report. For tax purposes, flag a month where a transaction occurs, because you may need to access this information in the future. Otherwise, you can shred monthly statements as new ones arrive, but keep annual statements until the sale of each asset within the account occurs and for 7 years thereafter, in case you get audited.
Tax returns/supporting documents: Here's a bum rap: You can only amend your tax returns going back three years, but the IRS has seven years to audit your returns. As a result, you need to hold on to your returns and all supporting documents for the same seven years. Some CPAs are making things much easier by putting tax returns on CDs. Ask your tax preparer if that's possible, because it cuts down on the bulging file cabinets.
Paperwork to keep for as long as you own the asset:
Appliance manuals and warranties: It may seem like a drag to hang on to the washer/dryer information, but you will be glad to have these if something goes wrong and you need to cash in on the warranty or contact a repair man.
Vehicle titles and loan documents: Do you want to wait in line for an hour at your local department of motor vehicles office in order to request a duplicate of your vehicle title? Me neither, so be sure to keep this paperwork in a safe and accessible place.
House deeds and mortgage documents: Your real estate lawyer will thank you if you can hand over the deed to your home when you are ready to sell. If you are a serial refinancer, make sure you keep the most up-to-date mortgage documents.
Insurance policies: Keep your homeowners, auto, disability and life insurance policies and declaration pages for as long as the policies remain in force. You can shred old policies.
Paperwork to keep forever (in a fireproof safe or safe deposit box):
-- Birth/Death certificates and Social Security cards
-- Marriage Licenses and Divorce Decrees
-- Pension plan documents
-- Copies of wills, trusts, health care proxies/living wills and powers of attorney (attorney/executor should have copies)
-- Military discharge papers
-- Copies of burial deeds and plots
-- Safe-deposit box inventory
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