Save or Shred? What to Do with Financial Records

Do you have boxes of financial records and paperwork stored in a closet? Do you throw away everything as soon as you don’t see a need for it? People tend to fall into two categories—they either save EVERYTHING or they save NOTHING. When it comes to your financial records, it’s important that you save the right things, for the right amount of time, in the right way.

There are a few primary reasons to save records: for tax purposes, to prove you paid for something or to prove you did something.

What to Keep and for How Long

While your unique situation might make it necessary to save some of these items longer than indicated, this list can give you a general idea of how long you need to keep your paperwork and records.

Things to Keep Permanently

• IRA contribution records
• Marriage, birth, divorce and death certificates
• Medical, military, education and employment records
• Wills, trust agreements, court documents and decrees
• Anything that you think might be in dispute or contention

How to Safeguard Your Records

When it’s time to discard financial records or paperwork, be sure to shred all documents. For the items you keep, it’s important that you have a system that is both organized and secure. Store non-replaceable documents and valuables in a safe deposit box. Keep other documents in a home file.

While many banks and other financial services companies offer paperless electronic statements, for documents you need to keep for any length of time (such as tax-related statements), relying only on the bank’s records could be risky. Institutions retain their documents for different periods of time and there’s always a risk that the business will close or change hands and leave you without easy access to your records.

Keep your paper records in a fireproof, locked file cabinet in a part of your home where it isn’t immediately visible. You might also consider backing up financial records on an encrypted hard drive or flash drive—but be sure it is kept up-to-date and in good working order.