When it comes time to clean house, you might just get the itch to kick every scrap of paper clutter in your house to the curb. But before you purge, you should probably know how long to keep bank statements and other important financial documents. You might be thinking, What’s the big deal? It’s just taking up space. And we feel you there — not to mention that if your storage and organization is lacking even in the slightest, it can start to look like a house of cards collapsed in your home, scattering paper squares into every crevice.
However (and, unfortunately, it’s a big one), there are some documents that merit safekeeping for, well, probably longer than any of us would like. You’re not alone in your confusion here, it’s not always intuitive which receipts and documents should be kept for a year, three, or seven. In fact, according to the latest search data available, the query is searched for nearly 1,900 per month. There are some documents you can joyfully shred, others you should keep for at least a year, and others you’ll have to find a home for for at least seven years. It may not be the most aesthetically pleasing arrangement, but it might protect you come tax time or in the event of some other potentially costly situation.
So, here’s what you should hold onto and for how long.
How long should you keep bank statements?
Fortunately, digital bank statements now exist, making it easy to store these bad boys in a delightfully clutter-free way (what a time to be alive!). Having said that, it’s never a bad idea to have a traditional paper record of your bank statements on hand. Either way, you’ll need to keep your bank statements for a minimum of one year. Annual statements that pertain to your taxes should be kept for at least seven years.
Why? Bank statements serve several purposes, including providing proof of income from interest-bearing accounts and showing tax-related transactions.
How long should you keep past tax returns?
Past tax returns are right up there with bank statements at the top of the “how long do I have to store these things?” list. And the answer isn’t necessarily the most fun, but it could keep you from a major IRS headache down the road. So, here goes: You need to keep your tax returns for a minimum of seven years after the return is filed. The IRS has a three-year window to audit your return if they suspect good-faith errors. If they believe you underreported your income by at least 25 percent, they have a six-year window. And they have an indefinite amount of time if they’re investigating fraud.
Some financial pros actually suggest keeping a permanent electronic or hard copy of each year’s tax return and any payments you make to the government — this is a critical component of your financial history. Plus, hanging on to your W-2s until you begin earning social security is the most accurate way to track your earnings.
How long should you keep pay stubs?
No need to hang on to your pay stubs forever. However, you will want to keep them for a year — long enough to get your W-2. Once you get your W-2, you can make sure all of the numbers line up. If they do, you’re safe to shred after a year.
How long should you keep credit card statements?
For some of us, keeping credit card statements around is just a glaring reminder that we could stand to tighten the reins of our own spending. Fortunately, you don’t have to live with that little paper guilt trip for long. Well, in most cases. The general rule of thumb is to keep credit card statements around for 30 to 60 days. However, if they include your only record of a tax-related expense or transaction, you need to squirrel them away for — you guessed it — seven years.
While you don’t need to keep most credit card documents for too long, you should keep correspondence about the closure of a card for about seven years. That’s because if you’ve gone ahead and requested the closure of a credit card and have received a letter or sent a letter to your lender confirming that the closure was at your request, you should keep those documents in case your credit is affected in some way.
How long should you keep canceled checks?
If you haven’t already noticed a theme, you will now — because, like other financial documents, canceled checks are safe to be shredded after a year unless they’re related to an IRS item. If you do need to keep a canceled check for tax purposes, you’ll need to hold onto it for at least three years following the tax year it pertains to.
Having said that, canceled checks that involve major life purchases (think your house or home upgrades) might prove important to hold onto indefinitely. Or, in the case of a house, until you sell.
How long should you keep bills?
Bills, bills, bills… who really wants them lying around, staring at you in the face? Well, here’s a bit of good news. If you’re still receiving paper bills in the mail, you only need to hang on to them for one month. As soon as you get the next statement showing you paid for the previous cycle, you can shred. Some financial pros recommend keeping bills for one year if you need them for tax purposes.
This is particularly of note for those of us who are self-employed since certain home expenses — utilities, cable, internet, cell phones, etc. — are used as deductions. In this case, it’s best to keep bills for three years after you’ve filed that tax return.
How long should you keep other important paperwork?
At this point, you might be looking around and thinking… But what about all this other stuff? So, we’ll give you a quick and easy run-down. There are certain vital records you should keep physical copies of forever (yes, in the immortal words of the 1993 cinematic treasure The Sandlot, “For-ev-er”). These include birth certificates, citizenship papers, custody agreements, deeds and titles, marriage licenses, military records, passports, wills, and divorce certificates. Basically, anything with an original signature or raised seal should go under lock and key.
If you’ve updated your passport, you should keep a copy of your expired one for at least 10 years. One, it provides proof of citizenship, proof of visa, proof of visit to a certain country, as well as for sentimental reasons. Additionally, keeping expired passports in a safe deposit box or under lock and key at home will help avoid you becoming the victim of identity fraud.
Anything home improvement or real-estate-related should be kept until you sell the home, plus seven years (because, taxes). And monthly brokerage statements or investment records you can keep for one year and then dump as long as your annual statement includes a summary of all activity. You’ll definitely want to tuck away those annual statements for your own records for seven years from their date of relevance.
When it comes to medical bills, it’s wise to keep them for at least a year, just in case your insurance company needs to refer to them — or if you need to contest something. According to Hermoney, you can deduct the amount of total unreimbursed allowable medical care costs for the year that exceed 10 percent of your adjusted gross income, something your accountant can help you with come tax season. However, if you do take that deduction, you must keep medical records for at least three years in case of an audit.
What can you get rid of?
Although it may sound that way, you don’t have to keep every single scrap of paper. Some receipts can be considered short-term keepers — once you match purchases like groceries or meals out with your monthly financial statements, you can shred those.
You can also shred ATM receipts as well as deposit and withdrawal slips once you reconcile those with your records. Of course, it’s never a bad idea to hold onto your receipts until tax time or even a few years beyond that to cover your own back. Fortunately, there are plenty of options for digital receipt-keeping now.
How should you store (or dispose of) these things?
Some experts will recommend a safety deposit box to safeguard vital records and other important paperwork. But that route could be problematic if something were to happen to you, or if you needed to access the box at an odd hour. In general, you need to keep these documents in a safe, dry, fireproof area such as a safe or lockbox. Anything electronic should be stashed in a password-protected file on your computer or online storage repository.
When it comes time to get rid of unnecessary docs, we’ve got one word for you: Shred. It’s the only way to stop identity thieves from piecing together paperwork that might contain your personal information. Bonus? It can be pretty darn cathartic.
Know Your Storage Options…
While most of your documents are fine to keep in a small file box or filing cabinet, there are the exceptions we mentioned above. Word of advice: Not all safes are created equal. When searching for a safe for your most important documents, you’ll want to make sure they’re fireproof and seal out water. Consumer Reports has some excellent advice for buying a fire safe. Did you know safes are rated based on what they can keep safe. For instance, computer discs and CDs can’t withstand the same high temperatures that paper can, so if you’re storing flash drives or disks with important information in them, you’ll want one rated accordingly. If this is starting to sound expensive, fret not. You can find a fire chest (similar ratings but smaller sizes) for around $25. If you need more room for bulkier items or want something you can bolt down to a floor or shelf, those safes start at $150.
If paper clutter is keeping you up at night, there are a ton of different options that can take the hassle out of organization. A large file box with many different pockets and folders will help you coordinate what goes where. Medical bills can all stay together, home and mortgage together, banking, retirement, etc. Storage solution stores like the Container Store and Staples are perfect, but don’t overlook your local Target and Walmart for super smart filing products.
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