Keep or Shred? Here’s What to Do With Those Documents You Filed

Look inside the home of any average person, and you’ll likely find at least one filing cabinet, with at least one folder that’s simply marked “Important Documents.” This seemed like a good idea at the time. You told yourself you’d only put one or two papers in there and would file everything else via a more specific system. Yet, over time, the folder filled up. From receipts to payment confirmations and everything in between, there are myriad documents that we keep simply because we know we shouldn’t throw them away immediately.

Yet, how long are we supposed to keep certain files, and how can we discern the difference? Let’s take a look at a few general guidelines to help us cut through the clutter and prioritize.

1. Items to Store Permanently

Yes, there are a handful of items you’ll need to keep around for as long as possible, preferably permanently. Two of the main files in this category are your tax returns and anything you would qualify as a major financial record, such as your mortgage documentation, will or any inheritance information.

These documents are all part of your lifelong financial history and can be useful in various situations down the road. For instance, any lender will need to see copies of your tax returns from at least a few years back before seeing if you qualify for a loan. Keep an electronic and hard copy these files for that purpose alone.

2. Items to Keep for Up to 7 Years

While the tax returns themselves should be stored permanently, you can safely shred supporting tax-related information after about seven years, according to experts. This timeline is established because, depending on the situation surrounding your tax filings, the IRS could request additional, supporting documentation from as far back as seven years.

If you’re unsure what qualifies as additional documentation, consider that anything verifying your personal information (think your address, SSN, income history via 1099 or W-2 and more) will fall under this category.

3. Items to Keep for One Year

After one year, you can safely shred other, regular statements that contain your financial account details. This primarily applies to your monthly credit card or banking statements, whether received electronically or via snail mail. Whether you keep a physical copy of the statements in your home filing cabinet or opt to save an electronic copy in a folder on your desktop, be sure you can access this data for one year after issuance.

In the same vein, hold onto all of your pay stubs for a period of one year. Why? You’ll need them to help verify that all information issued in your W-2 by your employer is accurate. You can read more here on why pay stubs are important.

4. Items to Keep for One Month

Your regular bill statements, such as those you receive for your utility or water payments, fall into this category. In the event that you need to dispute your next statement, you’ll likely only go one month back to see what you paid then. Otherwise, if your payments are successfully processed and all checks out, you can dispose of the statement then.

The exception to this timeline rule is that if you’re a self-employed entrepreneur, hold onto those utility statements, as well as any cable or cell phone bills, if you plan to write off such household payments as work-related on your taxes.

Moving Forward: Keeping Your Documents Safeguarded

The security of your documentation should be top-of-mind. With cyber crime amping up due to the proliferation of digital technology into every corner of our day, even electronic records are vulnerable to exploitation. As such, remember to store all your paper records in a safe location that’s out of the way, in a flameproof, flood-proof and theft-proof container. If you’re storing yours on your computer, take the extra time to archive all of your important files to ensure they’re backed up and add a password encryption onto them to prevent against unauthorized access.