We all get bombarded with statements and other documents from banks and financial institutions, and a question I’m often asked is, “What documents do I really need to keep, and how long do I need to keep them for?” Let’s walk through a checklist you can use to see which tax, healthcare, legal and asset and liability documents you need to keep, and how long to retain them for.
Legal documents like your Social Security card, birth certificate and passport should be kept forever.
Some tax documents should be kept for three years, while others should be kept for seven.
- Keep at least three years of state and federal tax returns and supporting documentation on file. Supporting documentation includes records that prove any income, deductions or credits claimed (W-2, 1099, end of year statements from banks and investment accounts).
- If you are claiming a loss for worthless securities or bad debt deduction, keep records for seven years.
If you have investment accounts or bank accounts:
- Keep the most current statements on file (paper or electronic).
- Keep the end-of-year statement on file until you complete your tax return.
- If you own investments purchased before 2012 (the year that custodians were required to track cost basis), keep records of what you paid for the non-covered investments in the event you sell them in the future, as the 1099 may not report cost basis.
More suggestions are made in the checklist.
Whether you’re saving your documents physically, in a document or a vault, we recommend organizing them in a consistent format structure. The structure we use and recommend is: