How long should I keep financial documents?

With both daughters off at university I’ve started what has become known at our house as the great purge of 2013. Both attics are being cleaned out and I’m reevaluating items that were once too sentimental to toss. Bins of old files are being sorted and I now have reems of paper stacked in the office. As I was culling the files I found myself saying, “Hmm, I might need that,” far too often. I’ve always kept tax documents for seven years and everything else for three except in a few areas. Looking back, I’m glad I broke that rule of thumb.

Two things happened this year that required I dig up documents dating back 15-20 years. Some I could find and some were long gone. I’m not suggesting that anyone keep every piece of paper or financial document for 20 years, but we need to keep enough to protect ourselves.

The first situation involved “lost property” being held in Ohio and North Carolina. This property is money being held by the states until I prove that I am who I say I am. the problem is that both checks are in my maiden name and one was sent to an address that is more than 20 years old. The easiest way to prove my identity is my social security card combined with my driver’s license. I did not drop my maiden name, so those documents along with my marriage certificate should work. Proving that I lived at that address is a little more difficult. I have no old utility bills to copy and send. We’re not talking a lot of money, so I’ll have to see what else they will take to prove I lived in that particular apartment for nine months, 20 years ago.

On a happier note, I was able to help solve a question about my youngest daughter’s vaccination history prior to her pre-college shots because I obsessively kept every document from the pediatrician from the time they were born. North Carolina keeps a database of immunization records of children living in the state and provides this record to schools, health departments, doctors and other healthcare providers. When the University my daughter planned to attend sent a form stating she would need every vaccination most kids get from birth in order to attend, you can imagine her concern. That’s a lot of needles!

This database was started after my children were already in school and had most of their vaccines. The girls’ pediatrician had entered our oldest’s daughters records into the database, but not our youngest’s records. After my daughter’s former pediatrician failed to fax her medical records over, I carried my file of documents to the office and our new doctor made sure our college freshman had the proper boosters and immunizations she needed for school.

The first situation might have been avoided if I had kept one utility bill from my old address. With scanners and means for storing digital copies of paper forms it is possible to keep quite a few documents without taking up space in your home. Storing digital copies of older documents on a thumb drive is a great way to make sure you always have the forms, documents or records you need. Store a copy in a safe deposit box for even greater peace of mind.

Document Type How Long to Store Documents
Medical receipts & reports Indefinitely – It is important to have a complete medical history, especially for school-age children. If medical expenses have been used as a tax deduction, then records and receipts should be kept for at least seven years
Education records Graduation – Unless you plan to keep report cards, standardized test scores and other school records for sentimental reasons, it is safe to cull them after your child has left the school system and either entered the workforce or is attending college.
Tax documents

Seven Years – The IRS has three years from the date you file your taxes to audit your returns if they suspect unintentional errors. If you discover errors in your return this deadline also applies to the length of time you have to file amended returns.

If you are suspected of underreporting your income by 25% or more, the IRS can audit your returns for up to six years after the date you file them.

There is no deadline for fraud.

Bills One year to indefinitely – For bills with paper statements, it is safe to shred and throw away the bill once paid and either a canceled check is returned or receipt of payment is indicated online.

One year to indefinitely

  • Original receipts for tax deductible or business expenses should be kept for seven years.
  • Receipts for large purchases or other insured items should be kept for insurance purposes until the items are no longer in your possession.
  • Other receipts should be reconciled with your budget and discarded.
Pay stubs & income records One to seven years – Reconcile pay stubs to your W-2 when it is received at the end of the year and if it is accurate, shred and dispose of the pay records. Records of other incidental income that is required to be reported on your taxes should be kept for seven years.
Investment statements Until sold – Keep purchase and sale documents to prove capital gains or losses.
IRA Contributions Indefinitely – After you start withdrawing money from your IRA at retirement you may be required to prove you have already paid taxes on any nondeductible contributions.
Mortgage & home improvement documents Seven years to indefinitely – Keep records related to taxes for seven years and maintain all records documenting permanent home improvements and expenses related to the sale of your home to prove the total cost basis of your home.
Credit Card Receipts

One year to indefinitely

  • Keep original receipts for tax deductible items for seven years. Credit card receipts may be accepted if original receipts have been lost.
  • Receipts for valuables should be kept for insurance purposes indefinitely or until you no longer own the items. Again, credit card receipts may be accepted if original receipts are lost. 
Retirement Savings Records One year until account closure or retirement – Monthly or quarterly statements can be shredded once they have been reconciled with annual statements. Maintain the annual statements until you close the account or withdraw the money during retirement.
Bank statements One year to indefinitely – Match up checks with receipts when possible. Keep checks that relate to taxes, home improvements, mortgage payments, insured items or other expenditures that may have long-term importance.