Important papers to keep: a checklist
Documents to store or shred.
Article published: August 27, 2020
The financial services industry certainly produces a lot of paper! While financial documents may not “spark joy,” there are important papers to keep, and we’ve created a simple checklist to help you declutter and organize your financial information. Here’s what you need to keep and when you can trash it.
Start by stacking all the paper in one big pile. Check your drawers (home and work), filing cabinets, folders, boxes, glove compartments, even your safe deposit box. Then separate the important papers to keep into these four groups:
Important originals you sometimes need and when it's okay to finally shred them:
- Medical directive (after a new one is signed)
- Passports (after you have replaced them)
- Power of attorney(after a new one is signed)
- Real estate deeds (10 years after the property is sold)
- Stock/bond certificates (when sold)
- Trusts (after a new one is signed)
- Vehicle titles (after the vehicle is sold)
- Wills and living wills(after a new one is signed)
Originals you rarely need but should keep forever:
- Adoption papers
- Beneficiary forms
- Birth certificate
- Cemetery deed
- Citizenship papers
- Death certificates
- Diplomas
- Divorce decree
- Guardianship arrangements
- Health records
- Household inventory and photos of possessions
- Immunization records
- Lawsuits
- Marriage certificates
- Military discharge papers
- Naturalization certification
- Pension plan documents
- Retirement plan benefits
- Social Security card
- Veteran's papers
Investment documents and when it's okay to shred them:
- Annuity contracts (after annuity is fully paid out)
- Investment account statements (seven years after the last investment held in the account is sold)
Other documents and when it's okay to shred them:
- College financial aid papers (10 years after the loan is repaid)
- Credit report (when a new one arrives)
- Document inventory (when you create a new list)
- Employee benefits (when you change jobs)
- Employment contract(when you change jobs)
- Financial statements (when new ones are drafted)
- Home purchase or improvement documents including loan papers, surveys, title policies, etc. (seven years after the house is sold)
- Insurance policies/invoices (a year after replacing the policy)
- Letter of last instructions (after writing a new one)
- Loan statements (10 years after the loan is repaid)
- Passwords you've written down (when you change them)
- Property tax assessment (after a new one arrives)
- Receipts for expensive items (after the item is sold or donated)
- Receipts for items under warranty (after the warranty expires)
- Social Security statement (after a new one arrives)
- Transcripts (after you complete another course)
- Vehicle registration (after a new one arrives)
- Vehicle repair documents (when the vehicle is sold)
- Warranties (after you dispose of the item covered)
Keeping these records safe, where you and others can find them when needed, can save you time and greatly increases the likelihood they will not get lost.
How long to keep tax documents
The IRS recommends keeping tax returns and supporting documents – such as W-2s, 1099s, and tax-related checks and credit card statements for three years. That’s because it has a three-year statute of limitations on conducting audits. However, you should keep your tax documents for up to seven years if any of the following exceptions to the three-year rule apply to you:
KEEP THEM FOR FOUR YEARS IF:
You maintain employment tax records. Keep these for at least four years after the date the tax became due or was paid, whichever is later.
KEEP THEM FOR SIX YEARS IF:
You underreported your income by 25% or more. In that case, the IRS can review your taxes from up to six years ago.
KEEP THEM FOR SEVEN YEARS IF:
You filed a claim for a loss from worthless securities (including worthless stocks or bonds) or bad debt reduction.
KEEP THEM INDEFINITELY IF:
You purchased property, so you can show the amount you originally paid for it.
You do not file a tax return each year.
Shredding important documents
Clearing your home of piles of old paperwork feels great, but there’s a reason we recommend shredding instead of tossing them into the weekly garbage. It’s because most of the documents contain personal information you don’t want to have exposed to anyone willing to do a little dirty work to steal your identity.
Either invest in a shredder for your home or use a professional shredding service (for which you’ll likely pay a fee). Also, your community might provide free document shredding services a few times a year.
Where and how to store important financial paper
While a fire and burglar resistant safe is recommended for storing important papers, it does have its limits. Fireproof safes, for example, often have a two-hour fire protection guarantee. In the case of fire, firefighters are usually able to extinguish a house fire within two hours. If you fear they won’t, invest in a safe that provides longer protection.
Also, experts say you should not open a safe for at least a week after a fire, so the box can cool down. If you open the door while the interior is still hot, letting oxygen inside can trigger a flash fire, instantly destroying the contents and possibly injuring you. Verify this with the manufacturer of your safe, get other important tips from them and read the manual before use.
Burglars are unlikely to spend hours trying to open a safe; they know that the longer they remain in the house, the more likely they’ll be caught. It is also a good idea to bolt the safe to the floor because thieves are known to take safes with them and open them later.
Is it ok to keep digital copies of important documents?
If you want to cut down on paper, you have several digital storage options. You can scan documents, but be warned: If your computer crashes, you could lose the data. Keeping all your documents on your computer isn’t very efficient. Better digital options include external hard drives or flash drives, but you might want to have multiple backups in case one is damaged.
Also be aware that,if your computer gets hacked, criminals will be able to gain access to all the financial information you store on your computer. If you choose to do so, make sure you have excellent cybersecurity in place and update it often.
Another option is cloud-based storage, which not only saves space but also can organize and keep documents secure through encrypted networks. Many providers allow access through mobile devices, making your documents accessible almost anywhere in the world.
If you do go digital, make sure you don’t need an original paper document in the future. The last thing you want is to shred something to save space, only to need it five years later.
If you need help collecting and understanding these documents, contact your financial advisor. Refer to this checklist annually to ensure you have only the most relevant and important papers saved, and enjoy shredding and decluttering what you no longer need to keep.
