How Long Should You Keep Financial Documents?
The 2019 tax filing deadline recently expired, which brings up an excellent opportunity to think about how long you should hold on to financial records. Here’s the general breakdown:
Seven Years or Longer
Most of us have been told to hang on to our tax documents for seven years. The IRS statute of limitations for auditing is only three years, but in some circumstances, the IRS can go back as far as six or seven years. In the case of your tax records, keeping them handy for at least seven years is the correct recommended length.
Other non-tax documents like credit card statements, pay stubs, or bank statements do not need to be retained for more than one year unless you are specifically instructed to do so. Most financial institutions offer your monthly financial statements online and generally make them available for one year or more. If you have that option, it is a secure, environmentally conscious, and convenient way to keep your records and access it at any time.
There is little need to keep medical bills after one year unless the balance or service is in dispute.
Less Than One Year
Typically, monthly bills do not need to be retained after they are paid. Most invoices are retained electronically with the provider, and proof of their payment can be found on your electronic bank or credit card statements with your financial institutions should you need to refer back to the transaction.
Keep While in Use
Product warranties, health insurance plans, insurance claims, employment records, and unemployment records should be kept while active. Otherwise, most do not need to be retained beyond their expiration unless required for tax purposes.
Documents to Save Forever
While most financial documents have a shelf life, some should never be discarded and include:
- Birth certificates
- Social Security cards
- Marriage certificates
- Adoption papers
- Death certificates
- Wills and living wills
- Powers of attorney
- Legal filings
- Military records
- Retirement and pension plans
- Inheritance documents
- Beneficiary forms
If there are other documents you think you might need, but aren’t sure, keep them until you are confident you will not need them.
Disposing Financial Documents
Make sure you’re not throwing your financial information away with the household trash. Anything that contains your sensitive information mustn’t get into the hands of anyone else. The best option is to shred your documents. Check with your financial institution to see if they offer free shred days. Some retailers, like office supply stores, may also provide shredding services. It’s a great way to purge your sensitive information safely.