Even if you dread it, getting your financial papers in order helps lower stress in your life, says Peter Walsh, author of "Does This Clutter Make My Butt Look Fat?" (Simon & Schuster, 2008). All you have to know is how long to keep your records and where they should be stored.
Post-tax season is the perfect time to start tackling your paper piles and computer files, because you're all-too familiar with your financial records and where things are situated. You can divide nearly all of them into four categories: papers that you need to keep for the calendar year or less, ones that can be destroyed when you no longer own the items they cover, tax records, which you should save for several years, and papers to keep indefinitely.
Hold on to ATM, bank-deposit, and credit-card receipts until you reconcile them with your monthly statements, then shred paper documents (to avoid ID theft) or securely trash electronic files unless you need them to support your tax return. Keep insurance policies and investment statements until new ones arrive.
Toss loan documents when the loan is paid off. Hold on to vehicle titles until you sell them. Keep investment purchase confirmations until you sell the investment so you can establish your cost basis and holding period. (If that information appears on your annual statements, you can keep those instead.)
If you fail to report more than 25 percent of your gross income on your tax returns, the government has six years to collect the tax or start legal proceedings. So keep returns for seven—just in case.
Essential records such as birth and death certificates, marriage licenses, divorce decrees, Social Security cards, and military discharge papers should be kept indefinitely. Also hold on to defined-benefit plan documents, estate-planning documents, life-insurance policies, and an inventory of your bank safe-deposit box.
Keep the following at home in a locked fireproof box or safe, or as a password-protected electronic file: bank and investment statements, estate-planning documents, pension information, insurance policies, pay stubs, tax documents, and your safe-deposit box inventory list.
Keep these in a safe-deposit box: birth and death certificates, Social Security cards, passports, life-insurance documents, marriage and divorce decrees, military discharge information, vehicle titles, and loan documents.
This article also appeared in the May issue of Consumer Reports Money Adviser.
Consumer Reports has no relationship with any advertisers or sponsors on this website. Copyright © 2007-2013 Consumers Union of U.S.
