The last time you looked at the enormous pile of receipts and financial statements you have, did you ever think to yourself, “how long should I keep these financial statements” or “do I need to keep this for any reason”?
Because of the confusing nature of what to keep, what to toss, and how long to keep financial statements, I’ve decided to write a post on how long to keep financial statements.
By the end of this post, you will have a complete picture of what you need to keep, for how long, and some of the reasons why you need to do so. Then you can attack that pile with ease and shred the rest of the statements and receipts.
As an added bonus, I created a financial records checklist PDF which you can download for free. The benefit of this is that you can keep the sheet in a folder with all of your other financial records and always have access to it.
I also have it as a picture later in this post so you can easily view it too as you are taking your first stab at clearing your financial statement pile.
So without any further ado, let’s get started!
How Long To Keep Financial Statements
General Financial Statements
Each month, you should be reconciling your checkbook to the statement that the bank sends you, or you get online. After you verify everything is correct, you should keep the monthly statements for one year.
The exception to this is if there was a purchase made that relates to taxes, home improvements, a business expense, etc. In these cases, you will want to hold on to the statement permanently, or until you sell the house, business, etc.
Some readers may be wondering if they have online access to their statements, why the need to keep the paper copy? After all, the bank can get them for you.
While this is true, most banks will only do this for you back to a certain time, say two years. Anything older is considered “research” and they charge you per the hour for this. The average charge is $25 an hour.
And while it should only take a few minutes to pull up your account history, who is to say it won’t take them a few hours because of the “complexity” of your account history? Save the statements, avoid the fee.
Credit Card Statements
You should keep the receipt for anything you purchase with your credit card until the statement arrives. Once you verify they match and the return period on the item has passed, you can toss the receipts.
If there is a tax related purchase, you should keep the statement for seven years. Otherwise, there is no need to keep the statement any longer than 60 days.
As with banks, you could get statements online too. Though again, most only go back a certain number of years. I am not aware of any credit card company charging the client to get old statements, but you never know.
You should keep the monthly or quarterly brokerage financial statements for both retirement and non-retirement accounts until you get your annual statement. Once your annual brokerage statement is received and matches the monthly and quarterly statements, you can shred the monthly and quarterly statements. Keep the annual statement until you sell the securities listed in it.
Again, I’m sounding like a broken record here, but you can get access to some statements online, but only up to a certain point. I remember having to call a mutual fund company for statements so I could confirm my cost basis. It took around a week to get the statements I needed in the mail.
Furthermore, I know that brokers are now required to report cost basis information, but I still like to have a copy for myself. Call me crazy, but that’s just me. I get rid of them after I have sold out of the investment in question.
Keep your pay stubs until you receive your W-2. Verify they match, then shred the stubs. Hold on to the W-2 for at least seven years in case of an audit by the IRS.
Keep your monthly bills, like electric, water, cable and internet, etc. for one year. After that, you can shred them.
In the event the bill is tax related, like if you run a business out of your house, you will want to keep that for seven years, again just in case you get audited.
You can shred receipts once you verify your bank or credit card statement is correct or the warranty or return period has passed. For receipts that relate to home or business expenses, you will want to hold onto those until you sell the house or business.
For receipts you plan to hold on to for a long time, like home or business expenses, you might want to consider scanning them into a digital file. This is because over time, the ink on the receipts tends to fade and a blank receipt isn’t going to do you much good.
Home Purchase And Remodeling Records
Any records relating to the purchase of your home or renovations to your home should be kept until you sell the house. This is because the money you spend improving your house will adjust the cost basis for you, which affects your capital gains.
More Involved Financial Statements
Keep all returns, deductible receipts, and any other tax document for seven years. You may even want to keep them permanently. The IRS has seven years to audit you if they feel that you made an error on your return.
Additionally, the IRS has six years to challenge your return if they feel you under reported gross income by 25% or more, and there is no time limit on how far back you can get audited if the IRS feels that you filed a fraudulent return.
Lastly, you have three years to re-file a return if you made an error and are claiming a refund.
In the case of house or car insurance, you only need to keep the financial statements until you get your new policy, then you can toss the old papers. In the case of life insurance however, you should keep that forever.
It used to be each year that you received a statement from Social Security updating you on your estimated benefit when you retired. Now all of this can be found online. It is up to you if you want to print this out or not.
Other Documents To Consider
In addition to the above, there are some things that aren’t financial statements, but you might be wondering if you need to hold on to for the long term. Here are those items, in no particular order:
- Birth certificate, marriage license, divorce paperwork, education and military record: Forever
- Loan documents (homes, cars, etc): Until you sell the item the loan was for
- Service contracts/warranties: Until the policy ends
Organizing Your Files
Now that you know what to keep and what you can get rid of, your first step is to separate your financial statements into 2 piles, a keep pile and a shred pile.
You might think at this point you are done, but you aren’t. You have one more organizing step to do.
Take your keep pile and go through it again. This time, you will make 2 more piles, and active pile and a storage pile.
Here is what you should keep in the active pile, which should be accessible because chances are you will need to get a hold of these on a regular or occasional basis.
- Appliance manuals, warranties and service contracts
- Bank statements
- Bill payment receipts
- Bills awaiting payment
- Credit card information
- Education records, diploma, transcripts, etc.
- Employment records
- Family health records, including vaccination histories
- Health benefit information
- Household inventory
- Income tax working papers
- Insurance policies
- Loan statements and payment books
- Password list
- Receipts for items under warranty
- Safe deposit box inventory (and key)
- Tax receipts, such as those received for charitable deductions
Your storage pile is for all of the financial statements you are keeping that are over 3 years old. In some cases, this won’t apply to everything. For example, for tax returns, you will want to keep the prior year’s return in the active pile, but everything older than that can go in storage.
And while product manuals are not considered a financial statement, I still included them in this list above because they are important. If you regularly refer to the manual, regardless of the age, you should keep it in the active file. All others can go into storage.
Keeping Financial Statements Checklist
As I mentioned at the start of this post, below is a visual guide for what to keep. Here again is the link to the downloadable PDF as well.
Hopefully, this guide helps you to not only shred some old, unneeded financial statements, but also to organize the financial records you are keeping so you know where everything is.
Once you finish going through your files, be sure to keep the most important documents in a fire-proof safe and as I mentioned earlier, do yourself a favor and buy a shredder to safely destroy those statements you no longer need.
If by chance your pile is too large to shred yourself, look for shredding events in your area. Most communities hold these a few times a year. You drive up to a huge truck that has a shredder in it and toss in your papers.
Of course, you should still buy a shredder too so you can stay on top of discarding files as needed.