Our life is frittered away by detail. Simplify, simplify. ~ Henry David Thoreau
Question: How long do I need to keep my financial documents? I have tax returns, investment statements, credit card bills and loads of other paperwork. I’m not sure if I need to hang on to it any longer. Help!
Answer: Here we are on April Fools’ Day, the first day of the month when individual tax returns are due. It’s likely that you’ve at least started on your taxes and have already tackled stacks of documents, e-files, and scanned receipts from the cloud to get your information together for your professional tax-preparer. This makes it the perfect time to get organized and start eliminating any unnecessary paperwork. If you’re like me, going through this process is a chore. Try to keep your eye on the prize focusing on the end result, which is a tidy and clutter-free zone. I keep thinking about how enjoyable it will be to have a nice, neat desk.
Start with the easy items like ATM receipts and bank deposit slips. These can be disposed of when the transaction shows up in your account. With identity theft increasing, it is good habit to check your accounts online every few days anyway to monitor for any unauthorized activity.
In addition, credit card statements should be reviewed each month. Unless there is a dispute, need for a return, warranty concern, or tax-related expense you’ll need to document, these can be shredded after one month. Most credit card issuers provide an annual summary statement that will cover what you need for the year. Anything that has your social security number and/or financial account numbers should always be shredded.
Your Credentials Please
For tax purposes you’ll want to keep verification of income and paycheck stubs until you receive your W-2. If you’re receiving social security or pensions, that documentation is necessary as well. Bank and brokerage statements should be kept for the current month and the previous year.
If you itemize expenses for tax deductions you’ll want to keep all dental and medical receipts, utility bills (if you have a home office), documentation for charitable donations, and employee business expenses for tax records. Once you’ve completed your tax return, all of these items along with mortgage interest statements, property tax bills, and investment firm 1099 forms may be kept with the applicable return to streamline your recordkeeping.
For tax purposes, real estate and retirement plan documents and records should be kept permanently. If they’ve been disposed of and taxes have been paid, keeping them for three to six years should be adequate, but use your best judgment.
The IRS has three years to audit you unless they suspect fraud or underreported income. Proof that you’ve filed and paid your taxes should be kept permanently. Keeping income tax returns indefinitely isn’t a bad idea either. Also in the permanent batch are annual statements for brokerage accounts and receipts for capital improvements to your home.
Finally, keep your life, health, home, auto and property insurance policies until they lapse, expire or are replaced. Medical records should also be kept along with military paperwork. Legal documents such as Wills, Trusts, Durable Powers of Attorney, Birth/Death Certificates and Marriage/Divorce Certificates should all be kept permanently in a safe place.
Once assembled, keep your documents safe, perhaps in a lockable, fireproof box or on a secure, encrypted flash drive. Give copies to a trusted advisor or loved one, and keep original paper documents separate, perhaps in a safe deposit box. In preparation for hurricane season it may be a wise idea to keep important documents in a waterproof container inside a zip-lock bag.
Procrastination and avoidance are normal human behaviors making it far too easy to say
“I’ll do it tomorrow.” Consider challenging yourself to seize the day today while these issues are on your mind. You might even be compelled to tackle two or three organizational issues as soon as you’ve finished reading this column. The task at hand may not be enjoyable, but the results are so worthwhile. As Leonardo da Vinci said, “Simplicity is the ultimate sophistication.”
As with investing and taxes, it’s all about what you keep. Stay focused and plan accordingly.
The opinions expressed are those of the writer, but not necessarily those of Raymond James & Associates, and are subject to change at any time. As federal and state tax rules are subject to frequent changes, you should consult with a qualified tax advisor prior to making any investment decision. Information contained in this report was received from sources believed to be reliable, but accuracy is not guaranteed.
“Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNERTM, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.” This article provided by Darcie Guerin, CFP®, Vice President, Investments & Branch Manager of Raymond James & Associates, Inc. Member New York Stock Exchange/SIPC 606 Bald Eagle Dr. Suite 401, Marco Island, FL 34145. She may be reached at 239-389-1041, email email@example.com. Website: www.raymondjames.com/Darcie.
This article provided by Darcie Guerin, CFP®, Vice President, Investments & Branch Manager of Raymond James & Associates, Inc. Member New York Stock Exchange/SIPC 606 Bald Eagle Dr. Suite 401, Marco Island, FL 34145. Call or email Darcie at 239-389-1041 or firstname.lastname@example.org with questions or suggestions for future columns. Visit her website: www.raymondjames.com/Darcie