How long should I keep my documents?

Powering Your Retirement Radio

Welcome to "Powering Your Retirement Radio"! Today, I want to address one of the most frequently asked questions about the documents you should keep hard copies of and for how long. It doesn't matter if it's your tax return or investment statements; fortunately, digital copies are acceptable for many of these documents now. But you may have a concern about what happens if the drive fails. Many people still have banker's boxes or a filing cabinet hiding somewhere. And if you are like many people, it is overdue to be cleaned out.

I will go over Tax, Healthcare, Legal, Asset and Debt, and Other Documents to keep track of. Let's start with Tax Documents, as outside of CA, tax season is over, and in CA, it is at least starting to slow down.

A. Tax returns and supporting documents - 7 years.

B. W-2 and 1099 forms - 7 years.

C. Deduction receipts and statements - 7 years.

D. Business expense receipts and statements - 7 years.

E. Investment statements - until you sell the investments + 7 years.

F. Property records - until you sell the property + 7 years.

G. Retirement plan statements - until you close the account + 7 years.

You should keep these documents for at least seven years in case of an audit. The same goes for your W-2 and 1099 forms. Deduction receipts and statements should also be kept for seven years, as should business expense receipts and statements. You might ask why? The IRS can audit your return up to three years after it is filed unless they are claiming fraud, and then it is seven years. Investment statements and property records should be kept until you sell the investments or property, plus seven years. Finally, retirement plan statements should be kept until you close the account, plus seven years.

Now for Healthcare documents, things like:

A. Medical records - indefinitely

B. Insurance policies - indefinitely

C. Explanation of benefits (EOB) - 1 year

D. Prescription receipts - 1 year

E. Health savings account (HSA) statements - 7 years

Medical records should be kept indefinitely, as should insurance policies. Explanation of benefits (EOB) should be kept for at least one year, and prescription receipts for at least one year. Health savings account (HSA) statements should be kept for seven years. I got an EOB this week from May of last year. Since I switched carriers this year, it was good to be able to pull out the old policy and call and find out what the charge was for. Also, on HSA, since you can carry forward expenses into the future, it really is seven years after you have claimed the expense since that is when you would claim the deduction.

How about those Legal-related documents:

A. Estate planning documents - indefinitely

B. Marriage and divorce documents - indefinitely

C. Adoption and custody papers - indefinitely

D. Wills and trusts - indefinitely

E. Power of attorney - indefinitely

F. Real estate deeds - indefinitely

G. Vehicle titles - until you sell the vehicle.

H. Lawsuits and settlement agreements - indefinitely

This section is simple, keep everything. You need the current copies but also the old copies to document the changes and when they happen. It doesn't happen all that often, but when a distant relative shows up claiming they were promised or are entitled to something, having clear documentation of when a change occurred can save a lot of hassle and potentially money.

Now for Asset and debt-related documents, basically for financial information:

A. Loan agreements and promissory notes - until the debt is paid off + 7 years.

B. Home purchase and improvement documents - until you sell the home + 7 years.

C. Vehicle purchase and maintenance documents - until you sell the vehicle + 7 years.

D. Investment and brokerage account statements - until you sell the investments + 7 years.

E. Real estate purchase and sale documents - until you sell the property + 7 years.

Loan agreements and promissory notes should be kept until the debt is paid off, plus seven years. Home purchase and improvement documents should be kept until you sell the home, plus seven years. This is important when you make improvements that will increase your cost basis. Vehicle purchase and maintenance documents should be kept until you sell the vehicle, plus seven years. Investment and brokerage account statements should be kept until you sell the investments, plus seven years. On this one, I tell people to keep their monthly statements for the current year and then keep the comprehensive year-end on file, and they can get rid of the monthly statements. Finally, real estate purchase and sale documents should be kept until you sell the property, plus seven years.

Finally, all your other important documents:

A. Birth certificates, marriage licenses, and other vital records - indefinitely

B. Social Security cards - indefinitely

C. Passports - until you renew.

D. Education transcripts and diplomas - indefinitely

E. Employment contracts and personnel files - indefinitely

You should keep hard copies of these documents. Birth certificates, marriage licenses, and other vital records should be kept indefinitely, as should Social Security cards. On Social Security Cards, you can get a new one issued, but you can't get more than three in a calendar year and ten in your lifetime. Passports should be kept until you renew them. Education transcripts and diplomas should be kept indefinitely. Employment contracts and personnel files should also be kept indefinitely.

That is a bunch of documents. It's important to note that the above recommendations are general guidelines and may vary depending on individual circumstances or jurisdictional requirements. Always consult with a professional advisor if you have any questions or concerns about document retention. I have attached a link here so you can download a checklist or fill out an online version.

Until next time stay safe!

You can visit the podcast website here: https://poweringyourretirement.com/2023/05/09/documents