The most difficult part of cleaning out your files is determining what to keep and what to shred.
To help you decide what to keep, ask yourself the following questions:
- Does this document contain information I will need some day?
- Will I ever need the document to defend a tax deduction, contract or warranty claim?
As you tackle this year’s file purge, here are some general guidelines for how long you should retain certain documents. If you have specific questions about a document, check with the IRS, and your accountant and/or attorney first.
As a general rule, documents with NO tax or financial/asset impact can be shredded once you have verified and reconciled your statements. Examples include:
- Credit Card Statements and receipts
- Investment Confirmations once they have been verified with investment statement
- Deposit and ATM receipts
- Cancelled Checks and Bank Statements (be sure to keep those for major purchases and tax deductions)
- Medical Bills/Insurance Payments
- Utility Bills – recommend keeping one, to provide easy access to account number and contact information
- Pay Stubs
Keep As Long As You Need It
Documents relating to purchases, improvements and tax returns for important assets or purchases (real estate), should be kept until the asset is sold plus an additional three years. (Example – if property was sold in 2008, you should keep those sales documents on record until the third anniversary month of the sale in 2011.)
- Records relating to investments, IRAs and retirement plans should be kept until the transaction has been fully completed and/or all funds have been withdrawn (if your annual brokerage statements list the year’s transactions, there is no need to keep monthly or quarterly statements)
- Insurance contracts and beneficiary designations should be maintained as long as they are still in effect
- Warranties for appliances and vehicles should be kept as long as an item is still owned
- Adoption and child custody records
- Certificates, birth, marriage, death
- Citizenship or Naturalization documents
- Family health and immunization records
- Legal documents, wills powers of attorney
- Receipts for major purchases
- Real Estate deeds and titles
- Separation and/or divorce records
- Social Security cards