I don’t know about you, but I use this time of year to get organized. You know, clean out my desk and files… or at least put them in some semblance of order. One of the questions I often get from my clients that are trying to do the same thing is…”What records do I have to keep, and which can I shred and throw away?”
So in honor of getting the year off to an organized start, I thought I’d give you my 4 rules of shredding.
To Shred or not to Shred… that is the question.
1. Bank records & statements – Only keep your deposit and withdrawal slips until you verify them on your next monthly statement. Keep your monthly statements for 7 years in case of an IRS audit. You can shred your CD records as soon as they mature and you’ve been credited the interest. You can also shred all your loan papers, with the exception of your mortgage, as soon as the loan is paid up. You should keep your mortgage documents to validate purchase price to ensure you get your full tax forgiveness in case you sell your house for a gain in the future.
2. Retirement Plan statements – You should keep your year-end IRA and 401(k) statements. Also, if you have made non-deductible contributions to your IRA, you should keep your form 8606. It proves you’ve already paid tax on the non-deductible portion of your contributions.
3. Investment account statements—You can shred your monthly statements after you get your quarterly statement*. You can shred your quarterly statement as soon as you get your next quarterly statement. You can shred all of your quarterly statements after you get your year-end statement. You should keep your year-end statement for at least 7 years. *Note: If your brokerage does not keep track of all sales and purchases of individual securities on their year-end statements, you should keep the monthly statements to verify purchase price.
4. Credit card statements and receipts—It is a good idea to staple your receipts to your monthly statement each month. This will allow you to find receipts quickly and easily so that returning unwanted items is less of a chore. After 12 months, you can shred your receipts and credit card bills (unless you need the bills to support tax deductions. If that is the case you should keep the bill statements for 7 years.)
I hope you found this useful! If you have any questions or need clarifications, please give me a call!
Also, if you haven't done so already, be sure to get your own Personal Organization Kit - my way of helping you get organized.
Have a Happy and organized New Year!