Clearing the financial paper clutter: What to hold, what to shred

Are your file cabinets overflowing with old statements and financial records? Here are some general guidelines to help you determine what should be retained and what can be destroyed.

When you get year-end reports, you can throw away your monthly statements. Compare the original monthly statements with the year-end records to make sure they are accurate.

Bank statements: Three years

You can get rid of bank deposit slips once you’ve reconciled your statement. However, you need to keep the statement if you are paying bills online — and especially if any of those bills are eligible for tax deductions. If you are paying your bills online, your bank statement is the only record of those online transactions. If your bank statements become part of your supporting documents on your taxes, keep them for at least three years.

ATM receipts are not important to hold onto. You can toss ATM receipts after your bank statement arrives and you’ve made sure everything matches up.

Tax returns : Seven years

Keep them for seven years but you can toss your supporting documents three years after you’ve filed your taxes. You’re usually safe from being audited after that time, unless you forgot to report a big chunk of your income. If you have any self-employment income, keep the records for at least six years.

IRA contributions: Keep records

If you made a nondeductible contribution to an IRA, keep the records indefinitely to prove that you already paid tax on this money when the time comes to withdraw. 

401(k) and other work retirement plans

Keep the quarterly statements from your 401(k) or other plans until you receive the annual summary. If everything matches up, toss the quarterlies. Keep the annual summaries until you retire or close the account.

Credit card records

Toss credit card receipts if they have appeared on the credit card statement, after making sure they match your statement.

Loan documents

Loan documents, plus proof of payments for the loan, should be kept for the life of the loan. Once you have paid off a loan, you need to keep the payoff statement indefinitely. This applies to mortgages, car loans, or financing contracts for other big-ticket items.

Insurance information and home inventory

Keep all insurance policies, such as for your car, home, life insurance, and umbrella policies while they are in force.

Also, keep an inventory of your home, including photos and valuation documentation, in case of fire, theft, or another claim. This can be kept in paper form or digitally.

Never throw away

Hold on to these documents forever: birth certificates, death certificates, marriage licenses, military discharge papers, passports, loan discharge notices, and Social Security cards.

Where to toss

Invest in a shredder or see if your financial institution or wealth management firm will shred your papers, especially if the paper you are tossing includes credit card and/or Social Security numbers.

Where to store

Buy a small, fire-proof safe you can keep at home, which can also include your updated will and trust and other important papers. Make sure your power of attorney, your lawyer, and designated family members know how to access your safe.

Electronic file storage

As more documents are available digitally, it is important to remember that your computer is essentially a filing cabinet as well; take advantage but also take steps to keep it secure! Use consistent naming conventions and a file folder system that is easy to navigate. Be sure you frequently back up your digital file storage in case your computer hard drive fails. For security, consider requiring a password to access your computer and hard drive, or password protect sensitive files. Some people have success with creating a password-protected spreadsheet with login information for websites, that way you only have one password to remember. Again, make sure your power of attorney and designated family members know how to access this digital information.

Beth Norman, CFP, is a managing director, financial advisor at RBC Wealth Management in Madison. She also leads The Norman Fletchall Team at the firm.

RBC Wealth Management is not a tax advisor. All decisions regarding the tax implications of your investments should be made in consultation with your independent tax advisor.

RBC Wealth Management, a division of RBC Capital Markets LLC, Member NYSE/FINRA/SIPC

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