Springtime is just around the corner. Now is a good time to rid your home of the clutter and paperwork you have accumulated over the past year. When it comes to reviewing your financial records, how do you know what to discard and what to keep?
Credit card and bank statements, canceled checks and past tax records are all important documents. But when is it safe to throw away certain financial records? Developing a plan to manage your paperwork can help ensure that you have the appropriate documents on hand if something should arise.
The Better Business Bureau, along with the Federal Deposit Insurance Commission, suggest the following record retention system as a reasonable approach for many people:
- Canceled checks: Those with no long-term significance for tax or other purposes probably can be destroyed after about a year. But canceled checks that support your tax returns, such as charitable contributions or tax payments, probably should be held for at least seven years – long enough to cover the six-year tax assessment period that starts when you file your tax return for the year the check was written. And, keep indefinitely (for other tax reasons) any canceled checks and related receipts or documents for a home purchase or sale, renovations or other improvements to a property you own, and non-deductible contributions to an Individual Retirement Account.
- Deposit, ATM, credit card and debit card receipts: Save them until the transaction appears on your statement and you have verified that the information is accurate.
- Credit card and bank account statements: Save those with no tax or other long-term significance for about a year, but save the rest for up to seven years. If you get a detailed annual statement, keep that and discard the corresponding monthly statements. Be sure to mark closed deposit accounts as such, so your heirs do not waste time wondering what happened to the money.
- Credit card contracts and other loan agreements: Keep for as long as the account is active, in case you have a dispute with your lender over the terms of your contract.
- Documentation of your purchase or sale of stocks, bonds and other investments: Retain these while you own the investment and then seven years after that.
To avoid becoming a victim of identity theft, be sure to shred any document that contains a Social Security number, bank account number or other personal information (especially financial information), before tossing.