What to Keep and What to Shred
Managing your record keeping system can be confusing. It is difficult to know what records to keep and for how long. We receive so much information that if we keep everything, the storage and organization of it would be unmanageable. Yet, we need to retain certain records for tax and other purposes. Some of these records need to be kept indefinitely, while others can be kept for a shorter time period. You have some time before we approach the end of the year to dust off those boxes and conquer your piles of paper.
Permanent: Let’s start with what you need to keep the longest. Set up a permanent file and keep the following documents in it: estate planning documents such as wills and trusts, health records, life insurance policies, retirement and pension plan documents, IRA contribution records, and personal documents such as passports, social security cards, and marriage, death and birth certificates. These records should be accessible to you as well as your heirs, in case anything happens to you.
Tax Documents: You need to keep your personal, federal and state tax returns, and any supporting documentation, for at least seven years. Some experts recommend keeping your tax return indefinitely. Supporting documentation includes W-2s, 1099s and other tax reporting documents. This also includes details on deductions or credits you may have taken, such as cancelled checks or credit card statements. For any assets you have sold, such as a home, you need to keep items such as purchase and sale records, commission detail, and improvements records. Keep your annual bank and investment summary statements to show expenses and records of cost basis and purchase price on securities that you may have sold. Note that many institutions now offer electronic statements, so you may be able to save these items electronically.
What to Shred: Some items need only be kept until you no longer have that obligation or asset. Keep documents for student, auto, and mortgage loans for as long as the loan is outstanding. Once the loan is paid, keep the documentation that proves the loan has been paid off. For any insurance policies or annuities, you should keep the contracts until the asset has expired. Save your vehicle records such as titles and registration information for as long as you own the vehicle. This also applies to warranties – you can discard information about the warranties when you no longer have the asset it covers.
It is worth mentioning that these records should be kept in a place that is protected from theft and other mayhem. Many of us live in areas that have been struck with recent weather calamities. Keep these possibilities in mind when you decide where and how to store these records. A safe deposit box is a good place to keep the more permanent records mentioned above. Remember that if you itemize on your federal tax return, you may be able to deduct the cost of the safe deposit box. You may want to store the other records in a more accessible place such as your home. Finally, when you discard records, make sure you shred them or use another method to ensure that no one else can obtain your personal information.u
This article is provided by Dawn R. Dickson, a financial consultant at Benjamin F. Edwards & Co. in Melbourne, FL, and was prepared by or in cooperation with Benjamin F. Edwards & Co. The information included in this article is not intended to be used as the primary basis for making investment decisions nor should it be construed as a recommendation to buy or sell any specific security. Benjamin F. Edwards & Co. does not endorse this organization or publication. Consult your investment professional for additional information and guidance. Benjamin F. Edwards does not provide tax or legal advice. Benjamin F. Edwards & Co., Member SIPC and FINRA. 2011-1010 Exp 12/31/2014