As we progress through life, we accumulate many documents –
forms, credit card statements, records, reports, legal agreements,
authorizations, and more. What do you do with all the papers you receive?
Knowing what to do with these papers is essential for maintaining an organized
and secure financial life. Some documents should be stored forever in a safe
place, with a copy in a different location. Some documents should be kept for a
short time, others can be thrown away, and others should be shredded. Here are
some practical guidelines tailored for individuals over 50 – but applicable at
any age – to help you manage your records effectively.
Your Home
You should keep a binder of important
paperwork, including the home’s appraisal, inspection, architectural plans,
closing statement, and deed. This makes it so much easier when you purchase and
sell your home. Your binder should include sections for:
Capital Gains Taxes Records: Captial gains are the profits
received when selling an asset, such as your home or rental property, based on
the period of ownership and the length of time lived in the home.
Closing Statement (Settlement
Statement): This
document records the financial details of your home purchase or sale.
Household Receipts and Home Warranties
(Service Contracts): Receipts
for appliances and systems in your house along with their warranties.
Loans and Mortgage Statements
Receipts for Capital Improvements: These are permanent structural alterations,
renovations, or repairs that improve the property substantially and increasing
its overall value: e.g. installing a new air conditioning and heating
system. This does not include basic maintenance and repair, such as
replacing a part on an existing HVAC system.
Investment Documents
Retain at least three months’ worth of
balance statements for your investments. Keep records of new investments until
you sell them and complete your annual tax filings.
Pay Stubs
As a general rule, hold on to your pay
stubs for one year. They can help verify the accuracy of your tax return
information. After that, it's safe to shred them.
Tax Records
Retaining your annual tax returns is
crucial. The Internal Revenue Service (IRS) advises keeping tax returns for up
to seven years from filing. Alternatively, you can keep them for two years from
the date you paid the tax owed. Some people opt to maintain their annual tax
records indefinitely for extra security.
Documents to Keep for a Short Time
Automobile Policy: Keep until you receive your new
policy. Remember to keep your current auto insurance card
in your wallet or glove compartment.
Bank Statements: Most bank statements should be readily
accessible for about one year, either in paper form (in case there
is a data breach and you need to prove your balance) or electronically.
Homeowners Policy: Keep until you receive your new policy,
then safely dispose of the old one.
Retirement Plan Statements: Hold on to quarterly statements until
you receive your year-end report, and then shred the old statements.
Utility Bills: These are
safe to shred once you
verify that the utility company has received your payment.
Vehicle Records: Hold on to car titles and purchase or
lease documents until the car is sold or returned to the leasing company.
Documents to Keep for a Lifetime
Legal Papers: Store original copies because
photocopies or scanned images are usually invalid. These include adoption
certificates, birth certificates, citizenship papers, death certificates,
financial and medical power of attorney legal documents, marriage licenses, military
records, your passport, and wills and trusts.
Financial Documents: Retain original investment, life
insurance policies, and stock certificates, along with paperwork related to
retirement plans.
Real Estate Documents: Safeguard your deeds, mortgage papers,
closing documents, insurance policies, and receipts for capital improvements.
A Note on Shredding
When disposing of documents, exercise
caution. Numerous papers contain sensitive personal information, including your
full name, address, phone number, social security number, and financial data.
Remember that information can be stolen from the internet, hacked, or otherwise
compromised. While shredding doesn’t provide foolproof protection, it
significantly increases criminals’ difficulty in misusing your information.
Prioritizing security is always a wise choice to avoid potential risks.
One Final Point
Consider compiling all your monetary and
medical information into a simple, easy-to-read document, including account
numbers, contact details, and other essential information. Update this document
at least annually and ideally every six months, perhaps January 1 and July 1,
to ensure that it is accurate and accessible in case you are unable to provide
this information due to an accident or emergency.
In conclusion, managing your documents
wisely is crucial to financial security as you navigate life beyond 50. By
following these guidelines, you can keep your important records organized,
secure, and readily accessible when needed.
Rivka Resnik is a popular writer on
financial topics and has developed the Living Smarter Personal Finance
curriculum for both junior high and high school students, which is being used
across the country.
