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How Long to Keep Financial Statements

How Long to Keep Financial Statements

Dear Valued Client: 

General Financial Statements

Bank 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. 

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, you can toss the receipts. Unless 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. 

Brokerage Statements (including Retirement Accounts):

You should keep the monthly brokerage financial statements (or quarterly brokerage financial statements if you get them four times a year) until you get your annual statement. Once your annual brokerage statement is received and matches the monthly/quarterly statements, you can shred the monthly/quarterly statements. Keep the annual statement until you sell the securities listed on it. 

Pay Stubs:


Keep your pay stubs until you receive your W-2. Verify it matches, and then shred the stubs. Hold on to the W-2 for at least seven years. 

Bills:

Keep your bills – electric, water, cable and internet, etc. – for one year. After that you can shred them. In the event the bill is tax related you want to keep that permanently. 

Receipts:

You can shred receipts once you verify your bank or credit card statement is correct or the warranty/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/business. 

Home/Condo Records:

Any records relating to your home/condo should be kept until you sell the house. This also includes any bills relating to improvements you made. 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

Taxes:

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 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. 

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. 

Social Security:

It used to be each year, you received a statement from Social Security updating you on your estimated benefit when you retired. Now all of this can be found online. For me – again, I might be crazy – I print out my statement and keep it until I print out the new statement the following year. 

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: Until you sell the item the loan was for 
  • Service contracts/warranties: Until the policy ends 

Final Thoughts

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 safely destroy the statements you no longer need. Remember you are always welcomed to call our office at 505-888-5070 and use our shredder. 

Sincerely, 

David Gallagher

Wealth Manager 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Sources: 

https://www.moneysmartguides.com/how-long-to-keep-financial-documents