It can be hard to know which documents to keep and which ones to toss out. Should you hang onto every bank statement or grocery store receipt? The paper piles, I mean files, can get overwhelming... Here’s a suggested timeline for keeping/shredding documents. Note that any document with sensitive personal information should be shredded rather than simply tossed, just to be on the safe side.
Documents that should be kept indefinitely in a secure location:
- Birth/death certificates and Social Security cards
- Marriage licenses and divorce decrees
- Pension plan documents
- Copies of wills, trusts, healthcare proxies/living wills, and powers of attorney; your attorney and executor should also have copies
- Military discharge papers
- Copies of burial deeds and plots
- Safe deposit box inventory
- Copies of all tax returns
Suggested timeline for retaining other important documents:
- Supporting documents for tax return (W2, 1099, etc.): Seven years—this is the recommended minimum period to retain. Remember, tax return copies should remain on file forever.
- Investment records and statements: Seven years—these are needed for tax filings and should be kept for at least three years, although it's easier to keep them for the same amount of time as the supporting documents for tax returns since they're already stored.
- Credit card statements: 12 months to seven years—keep up to seven years if the statement may be used for taxes, or as proof of purchase for insurance.
- Bank statements: three + years—keep statements for three years or longer if you apply for Medicaid, or if they pertain to taxes, business expenses, home improvement, mortgage payments, or a major purchase.
- Medical and dental records: One to five years—keep for at least one year, and up to five years to be safe. Retain information about prescriptions, specific medical histories, health insurance information, and contact information for your physician.
- Utility and phone bills: One year— If you can use them for business deductions, keep them for a year. It's also helpful for budgeting.
- Insurance policies: Until closed—keep as long as the policies remain in force.
- Mortgages and other home documents: Ownership plus six years—mortgages, deeds, and home improvement documents should be kept on file for the length of ownership, plus six years after selling the home.
- Appliance manuals and warranties: If owned—keep on file for the length of ownership.
- Vehicle titles and loan documents: If owned—keep on file for the length of ownership.
- Pay stubs: Until end of year—there’s no requirement for keeping pay stubs. Keep up to three months of pay stubs if you’re applying for a loan. The benefit of keeping a year’s worth of pay stubs is that you can compare them against your W-2.
Sorting and filing prior to tax time makes sense. I normally tackle it in January or early February each year. Should you be audited at some point, you'll be glad you hung onto your documents. While we don't have control over many things in life, getting and staying organized is one area we can buckle down.