Are you drowning in paper but afraid that you'll throw away something you might need? Find out which records to keep and for how long.
Money Girl
167 MG How Long to Keep Financial Records
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Hi everyone, and welcome back to Money Girls Quick and Dirty Tips for Richard Life. I'm Laura Adams. Are you drowning in paper, but not really sure which financial documents are safe to throw away? In this podcast, I'll tell you what records you really need to keep and what can be tossed. Many people are very unsure about what types of records and financial documents they should save. I used to file everything and keep it for years and years and years. My filing cabinets were bursting with bank statements, receipts, and bills. I kept stuffing in more Manila files and bringing in bigger filing cabinets. My office was like the Roach Motel. Paper checked in, but it didn't check out. So I know what it's like to accumulate a lot of paper. Now, thanks to online banking, I touch as little paper as possible and file only when I absolutely have to. Less paper means less clutter, less work to organize it, and fewer trees to be harvested. So if you're up for a little spring cleaning, let's start by understanding what you can safely throw away and what you really need to keep. First off, here's a list of very important documents that you should keep forever because they're impossible or very difficult to replace. Keep the following records in a fireproof, safe, or in a safe deposit box. Birth and death certificates, adoption papers, citizenship papers, military records, marriage and divorce papers, immunization records, passports and social security cards, and updated legal documents such as wills, estate plans, living trusts, and powers of attorney. Here's a quick and dirty tip. It's also a wise idea to store a list of all your financial accounts, insurance policies, assets, and contact information for professionals such as your lawyer or accountant in a safe place too. KnowYourStuff.org is a free online program that takes you step by step through the process of creating a home inventory and uploading photos. Having that information stored remotely would sure be a lifesaver for insurance purposes if your home was ever destroyed. But what about your financial records? For taxes, you have up to three years to file an amended tax return and the IRS has up to six years to audit you. However, IRS Publication 552 says to "keep your records as long as they may be needed for the administration of any provision of the Internal Revenue Code." I'll take that to mean "forever." The IRS also says that you should keep your W-2 statements until you begin receiving Social Security benefits. So I don't throw away my old tax returns or any supporting documents. I recommend that you hold on to them for life as well because you simply never know what issues could come up in the future. As for documents related to investments and real estate, they should be kept for at least seven years past the date you sell them. That includes paperwork for the purchase of a home or rental property, such as your closing statement, purchase contract, deed, mortgage appraisal, survey, title insurance, and inspection reports. Records and receipts for improvements to real estate should also be kept for a minimum of seven years. That might include remodeling projects, a roof replacement, or installing windows, for instance. Those types of capital improvements increase your cost basis and a property, which can potentially lower your tax bill when you sell it. Your untaxable brokerage statements should be kept seven years after you sell a security such as a stock or exchange traded fund, even if they're available online. That's because there's always the possibility that your brokerage firm could go out of business. Also, brokerage firms have different policies about how long they make electronic records available and how much they charge to retrieve older documents. You need your investment statements to document your capital gain or loss on an investment. And your end retirement account statements and any rollover or transfer paperwork between custodians should be kept until you retire in case any errors were made. You can shred monthly or quarterly brokerage and retirement account statements after the annual ones arrive. Good taste is easy to spot, but hard to pin down. You know it when you see it, and in today's culture, there's no greater signifier of taste than the car you drive. You want something sophisticated but not stodgy, daring, yet classic, approachable, but with an air of opulence. It may sound like a rare find because it is, and it perfectly describes the Range Rover Evoke. Drive a statement piece with pure presence. The Evoke is charisma in motion. This luxury SUV is artfully crafted and designed to stand out, and the reductive exterior is an elegant expression of Range Rover DNA. With clean lines, the minimalist design speaks for itself. The chiseled taillights give it a sense of motion. Even at standstill, you'll find quality materials and solid craftsmanship at every turn. And you can curate your interior with a variety of distinct themes and trim finishes. It's an elevated drive for elevated lives. Explore the Range Rover Evoke at LandRoverUSA.com. Buying or selling a home is a big deal. Literally, it's one of the largest financial transactions you're likely to make. So work with someone who will work with your best interest in mind. Someone who agrees to operate with transparency, honesty, and fairness every step of the way. Real tours are members of the National Association of Real Tours and are bound by a strict code of ethics that requires they put your interests above their own. Because that's who we are. Make sure your agent is a real tour. Earning your degree online doesn't mean you have to go about it alone. At Capelli University, we're here to support you when you're ready. From enrollment counselors who get to know you and your goals to academic coaches who can help you form a plan to stay on track. We care about your success and are dedicated to helping you pursue your goals. Going back to school is a big step, but having support at every step of your academic journey can make a big difference. Imagine your future differently at Capella.edu. Here are some documents that you only need to keep for a year. Employment records and pay stubs should be kept until you verify that they match your annual W2 or 1099 statement. Vehicle paperwork, such as your bill of sale, lease contract, registration and warranty should be kept for a year after you sell it. Bank statements for accounts such as checking and savings should generally be kept for a year unless you have online access to them. If there are tax-related items such as charitable donations or medical expenses, always keep a copy with your tax records. And insurance policies should be filed or kept in a safe place as long as you own them. Shred old policies after they've been replaced by a new one or after you sell the asset. If you make an insurance claim, keep the paperwork for a year after you receive payment. But if the claim was tax-related such as for a large medical expense, keep the documents for at least seven years. You'll be glad to know that there are many records that you don't need to keep, like your everyday household bills and loan and credit card statements. So opt to receive them as e-bills or e-statements and pay them online if you can. Digital copies are safer and faster than relying on snail mail. Plus, you won't have to handle any paper and can still print a copy if you need one for tax purposes. That might be the case if you have deductible expenses for a home office or student loan, for example. For debit card and credit card receipts, keep them in a receipts file until you match them to your monthly statement or online account records. Then you can shred them. Your receipts for purchases made by cash should be saved until you enter them in your accounting records or budget register. Yes, it's critical that you keep up with your cash transactions too. However, when you make a large purchase for something like electronics or jewelry, always file the receipt in case you need to make a warranty claim or prove the item's value to your insurance company. And of course, save all receipts that you may need for tax purposes. Now that you know what you really need to keep, you might consider scanning those documents and storing them on an encrypted flash drive, external hard drive or a remote backup service like Carbonite instead of filing the hard copy. To be safe, use a combination of those storage options to make sure you'll never lose your data. The IRS considers digital document copies just as good as the originals. However, any paperwork with an original signature or notary seal, like a will or contract, should never be thrown away, even if you scan it for a backup copy. I want to thank everyone who's downloaded my newest audiobook, Money Girls 10 Steps to a Debt-Free Life. Learn how easy it is to get out of debt and stay out of debt for good. Understand which debts to pay off first, when to refinance, and how to raise your credit score, cut costs and lots more. Pay control of your finances and create a more secure future. Get your copy of Money Girls 10 Steps to a Debt-Free Life today at audible.com or in the iTunes Store. I'm glad you're listening. Cha-ching! That's all for now, courtesy of Money Girl, your guide to our richer life. Is this house a good price compared to others in the area? Are prices going up or down? 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