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 financial statements” or “do I need to keep this bank statement 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 records.
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.
So without any further ado, let’s get started!
How Long To Keep Financial Statements
General Financial Statements
How Long To Keep Bank Statements
We will start with how long to keep bank statements since these financial documents apply to almost everyone.
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 bank 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.
How Long To Keep 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.
Some of you might hold on to credit card statements as proof of purchase should the item you buy drop in price within 30 days. Most retailers will refund you the difference. If you fall into this boat, save yourself the hassle and use Paribus.
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How Long To Keep Brokerage Statements
How long should you keep investment statements? 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 on 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 owning a mutual fund for many years and having to call the 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.
How Long To Keep 401k Statements
When it comes to how long to keep 401k statements, you should follow the plan above. Keep the quarterly statements until you get your annual statement. If the annual statement looks good, toss the quarterly statements.
You should keep the annual statements until you sell the investments in your 401k plan or roll it over into an IRA or other 401k plan.
How Long To Keep Pay Stubs
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.
I realize that as the year progresses, your pay stub will have updated information in the year to date column. You might think you could toss the old pay stubs as a result. But if you do and and issue comes up, you will have to do a lot of math to figure out the numbers.
And if you get special bonuses or your paycheck isn’t the same every week, this could make the math a nightmare. The simplest solution is to just keep pay stubs until you get your W2 in the mail.
How Long To Keep Bills
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 those bills for seven years, again just in case you get audited.
How Long To Keep Receipts
You can shred receipts once you verify your bank or credit card statement is correct, the warranty or return period has passed, or there is not a price drop on the item you bought. For receipts that relate to home or business expenses, you will want to hold onto those until you sell the house or business.
Of course, if you don’t want the hassle of keeping receipts to check for price drops, you can sign up for Paribus. This is a free service that will scan your receipts from participating retailers. If the price of an item drops within 30 days, Paribus will get you your money!
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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.
How Long To Keep Mortgage Statements
Any records relating to the purchase of your home should be kept until you sell the house. This is because you can write off mortgage interest on your taxes. Additionally, a portion of any gains you make on the sale of the home can be excluded from your taxes, so by keeping your statements, you have proof of the amounts you paid.
How Long To Keep Home Improvement Records
You should keep the invoices and receipts for the money you spend improving your house over the years. This is because any improvements you make will adjust the cost basis for you, which affects your capital gains when you sell the house.
More Involved Financial Statements
How Long To Keep Tax Returns
Keep all tax returns, deductible receipts, and any other tax documents 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.
How Long To Keep Insurance Policies
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.
How Long To Keep Social Security Statements
It used to be each year that you received a statement from the Social Security Administration 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.
I choose not to print it out but I do take a few minutes to verify that the amount of income the online statement shows I earned for the previous year matches with what I actually earned.
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
How Long To Keep Financial Records Recap
I know that was a lot of information, so here is a summary of how long to keep financial statements:
- How Long To Keep Bank Statements: Monthly, then keep annual statements for 1 year unless purchases are related to taxes
- How Long To Keep Credit Card Statements: 60 days unless purchases are related to taxes
- How Long To Keep Brokerage Statements: Until you receive the annual statement. Annual statements should be kept until securities are sold.
- How Long To Keep 401k Statements: Until you receive the annual statement. Annual statements should be kept until account is closed.
- How Long To Keep Pay Stubs: Until you receive your W2
- How Long To Keep Bills: One year unless tax related
- How Long To Keep Receipts: Until you receive the bank or credit card statement with the transaction
- How Long To Keep Mortgage Statements: Until you sell the house
- How Long To Keep Home Improvement Records: Until you sell the house
- How Long To Keep Tax Returns: 7 years
- How Long To Keep Insurance Policies: Until new policy is received
- How Long To Keep Social Security Statements: N/A, can be accessed online
Organizing Financial Documents
Now that you know what financial records to keep and what you can get rid of, you can now focus on organizing financial documents you plan to keep.
You can go one of two ways here, keeping paper copies or going digital. Luckily, both options follow the same outline, and organizing financial documents isn’t difficult.
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 steps to do.
Take your keep pile and go through it again. This time, you will make 2 more piles, an 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 from time to time.
- 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 of the item, you should keep it in the active file. All others can go into storage.
I used to use this file organizer for my active file. I just labeled the folders and put the financial records in their assigned folder. For storage financial records, I just put them into a box and labeled it.
But now I do things digitally. You can buy a scanner like this one or you can just use the scan feature if your printer has it. Just scan your documents, rename them, and insert them into the folders you create.
I don’t keep things on my computer, I use a flash drive and I make it a point to back it up monthly just in case.
When going digital, just create a folder structure like outlined above. You will have 2 main folders, active and storage. Each of these folders will have sub-folders for the documents. For example, you will have a banking folder, a credit card folder, etc.
To make things easier to transfer over to the storage folder, be sure to include the date in the file name. Then you can sort by name, highlight all of the old documents to move and move them in bunches.
Keeping Financial Statements Checklist
As I mentioned at the start of this post, below is a visual guide for what to keep. If you want to download the checklist for future use, the link to the downloadable PDF as well.
Hopefully, this guide for how long to keep financial statements helps you to not only shred some old, unneeded financial statements, but also to organize the financial statements 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 in the future.
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