Once tax season is over, people often start to wonder how many years of financial statements they need to save. There are some best practices for what to save and what to shred.
If you don’t own a shredder, buy one. If you have too much to shred, hire a service that will come to your house and shred your documents for you. Some municipalities even have free shredding events. Don't ever throw away financial documents containing personal information without shredding them first.
Here is what you should save, and for how long:
- Bank account/brokerage statements: Keep these for three years.
- December statements: Some people save these for years so they can look back to see how they did relative to saving and growing over several years.
- Trade confirmations: These do not need to be saved and can be put into the shredder when you get them. The purchase information will be on your 1099 when the security is sold.
- Tax returns: Keep your most recent tax returns for six years. Retain full supporting documentation such as W-2s, 1099s, bills, credit card and other receipts, invoices, proofs of payment, employment tax records (if you have employees), etc. For those returns that are older than six years, just save the 1040s as a historical record.
- Retirement/savings plan statements: Keep the most recent three years of the annual summaries until you retire or close the account.
- Receipts/bills: Keep bills or receipts for large purchases such as jewelry, appliances, cars, furniture, etc. in an insurance file for proof of value in the event of loss or damage. (For related reading, see: What Is and Isn't Covered by Homeowner's Insurance.)
Other Personal Documents to Keep
Other key documents, like the current version your will, homeowner's insurance policy, birth certificates for every family member and your old passports should be saved. As for property records, save any surveys, certificate of occupancy, deed, any records documenting the purchase price and the expense in selling it, and any receipts for permanent home improvements made to the house or property. Save your vehicle title for each car.
How to Keep Your Records Safe
Save important documents in a fireproof box to safeguard them. To prepare for an emergency, send a copy of each of the key documents listed above to a trustworthy friend or relative for safe-keeping. It will be very helpful to have access to these documents if you ever find yourself in that situation.
This may seem like a lot of work for documents we don’t look at very often, but you'll be glad you put the work in if you never need them.
(For more from this author, see: Financial Planning Tips for 50-Somethings.)
Disclosure: Lang/Ciosek Team is registered with HighTower Securities, LLC, member FINRA and SIPC, and with HighTower Advisors, LLC, a registered investment advisor with the SEC. Securities are offered through HighTower Securities, LLC; advisory services are offered through HighTower Advisors, LLC. This is not an offer to buy or sell securities. No investment process is free of risk, and there is no guarantee that the investment process or the investment opportunities referenced herein will be profitable. Past performance is not indicative of current or future performance and is not a guarantee. The investment opportunities referenced herein may not be suitable for all investors. All data and information reference herein are from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other information contained in this research is provided as general market commentary, it does not constitute investment advice. The team and HighTower shall not in any way be liable for claims, and make no expressed or implied representations or warranties as to the accuracy or completeness of the data and other information, or for statements or errors contained in or omissions from the obtained data and information referenced herein. The data and information are provided as of the date referenced. Such data and information are subject to change without notice. This document was created for informational purposes only; the opinions expressed are solely those of the team and do not represent those of HighTower Advisors, LLC, or any of its affiliates.