EVOacademy

How long should you keep tax returns, investment statements and other financial documents?

Many of our clients have asked us what to do with years of papers and electronic documents that have something to do with their financial lives. Some of these are really important, and others just take up space.

How long should you hold onto all of this stuff, and, how can you properly discard what you don’t have to keep?

Start with three simple steps to follow:
1. Ask “what kind of document is this, and how long should I keep it?”

2. Divide your documents into things you can keep electronically or hard copy

3. Determine how to keep them safe and how to securely destroy what you don’t need.

• Let’s start with Tax documents – 6 years.
  • Your state and federal tax returns generally need to be retained for 6 years under Revenue Procedure 97-22.
  • Digital and scanned copies are fine as long as they contain all relevant information.

• Investment and bank account statements – 6 years along with your tax records.
  • Electronic copies are fine.
  • There are a couple things to look for while you’re looking through all of your statements:
    • After-tax contributions to retirement accounts. Look at your IRA and 401(k)/403b statements to see if you have any “after-tax” contributions or balances. If you do, let us know because you’ll absolutely want to have documentation on the amount contributed.
    • Cost basis. If you have stocks, bonds or mutual funds purchased more than 15 years ago, make sure you have a record of the amount you paid for these – let us know if you need some help here.
    • So, keep your investment account statements for six years – a year end statement is fine. Electronic format is generally fine.

• Liabilities — mortgages, car loans, credit cards and insurance claims –
  • Keep these as long as you own the property or the loan or claim is open.
  • Electronic format is generally fine.

• Medical bills and healthcare documents
  • Six years if you deduct health-related expenses. Electronic format is fine.
  • Now, if you are using your HSA as a long term savings account, keep these records into retirement. Please talk with us about this if it applies to you.

• But wait, some documents must be kept in their original physical forms and kept permanently. These include:
  • Your estate planning documents (Wills, trusts, powers of attorney)
  • Social Security Cards
  • Birth and marriage Certificates
  • And of course, original stock and bond certificates, titles to cars, boats, real estate and so on.

Now the question is HOW to keep these documents safe?

• For original documents,
• You have choices like a good safe in your home and a safe-deposit box at a bank.
• Both have risks, but are far better than a file drawer in your desk or a coffee can in the cupboard.
• For electronic documents:
• We recommend using an online backup like iCloud, Drop Box, Box.net, Citrix Sharefile or one of the many online storage solutions available.

If you’d like to develop your document retention checklist, please let us know, we’re happy to help.

To learn more about protecting yourself from identity theft, ask us about our tips.

Since it’s okay to retain some of your documents in digital form, let’s talk about keeping them safe, and protecting yourself from cybercrime.

• First, please, please don’t keep only one copy of your important documents – including all your photos, music and family recipes – on your computer’s hard drive. Those have a way of failing, and you sure wouldn’t want to lose really important stuff that way.
• We recommend using an online backup. Some popular ones include iCloud, Drop Box, Box.net, Citrix Sharefile or one of the many secure online storage solutions available.

But now we need to protect those documents along with your login credentials to your bank account, credit cards, investments, Social Security…the list goes on.

• We recommend using a password vault. Some popular tools include 1Password, LastPass or Dashlane. Not only do these tools remember all of your login credentials for you, the good ones offer security features to keep your passwords safe and come with other fraud-detection features.

John B. Clair is a Certified Financial Planner™ professional (CFP®) and NAPFA-registered financial advisor. EVOadvisers is a fee-only financial advisor based in the Scott’s Addition area of Richmond, Virginia. EVOadvisers also has an office in Irvington, Virginia to better serve clients in the Northern Neck of Virginia. If you have any questions about financial planning and would like to talk with one of our Certified Financial Planner professionals, check us out at www.evoadvisers.com or call (804)794-1981.