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A Guide to Organizing Financial Paperwork
May 13, 2016
Taking control of your paperwork doesn't have to be difficult – follow this guide to clean out your financial clutter
Nearly one in four Americans has either lost or forgotten about a vital financial document, and only 40% think they could find a key document at a moment's notice, according to a 2010 Consumer Reports Poll.
This means many of us are wasting time looking for financial papers buried in piles of clutter or disorganized files. But what if you could feel empowered, knowing that important documents are easily accessible at any given moment? A good starting place is to determine what financial papers to hold on to and what to toss. Here are some guiding principles to help you sort through the clutter:
What financial papers to keep
- Keep paycheck stubs for one year to ensure they match your W-2.
- Keep receipts for big purchases (computers, furniture, jewelry, etc.) indefinitely for warranty and insurance purposes.
- If you make charitable donations via credit card, keep statements to support the income tax deduction.
- Keep year-end investment statements and other records as long as you own the securities.
- Keep nondeductible individual retirement account (IRA) records to prove you already paid income taxes on the contributions.
- With insurance policies that you renew each year, such as home, apartment and automobile, keep the most current contracts and dispose of older ones.
- Save tax returns indefinitely and supporting documents for six years. The IRS has three years to audit you and six to challenge underreported income.1 But if the Social Security Administration says you didn't work 15 years ago, pulling out your tax returns is one way to prove you did. Quick tip: When it comes to taxes, make sure the year is clearly marked on the outside of each envelope.
How to organize what you keep
Once you've determined which documents to keep, it's time to organize your papers. Options include going paperless, using a filing cabinet or storing documents in three-ring binders. If scanning and backing up electronic files is not your style – don't go paperless. If you opt for binders or file folders, be sure to label each file appropriately so you can easily maintain your filing system. Choose whichever method works best for you.
The following should be kept in a safe-deposit box:
- Wills, trusts and powers of attorney documents.
- Birth, marriage and death certificates.
- Adoption and custody papers.
- Life insurance contracts.
- Car titles.
- Property deeds.
It can take months to replace lost originals, and the resulting frustration will far outweigh the organizational effort. Electronic copies will work for quick reference but won't make them legally useful, in most cases.
What documents to toss
- Toss paid bills at your discretion (some people get a kick out of comparing old heating bills with their current one).
- Purge bank statements every few years if you get paper copies from your bank.
- Pitch monthly/quarterly investment and retirement plan statements annually.
Remember to shred all documents containing confidential information such as your Social Security number, a financial account number or other identifying information. An estimated nine million Americans have their identities stolen each year, according to the Federal Trade Commission. Taking the necessary precautions to protect your information is worth the extra effort.
Many banks and charitable organizations now offer electronic statements. Consider switching from paper to electronic statements. Electronic statements are easy to save, and if you have questions, you can find what you need online.
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Keep in mind that these are guidelines and may vary depending on your personal situation. In some situations longer retention may be required. Thrivent Financial its representatives and employees cannot provide legal, accounting, or tax advice or services. Work with your Thrivent Financial representative and, as appropriate, your attorney and tax professional for additional information.
Securities and investment advisory services are offered through Thrivent Investment
Management Inc., 625 Fourth Ave. S., Minneapolis, MN 55415, a FINRA and SIPC member
and a wholly owned subsidiary of Thrivent Financial, the marketing name for Thrivent
Financial for Lutherans. Fee-based investment advisory services are available through
qualified investment advisor representatives only.
1 IRS Audit FAQs