How Long Should You Keep Financial Records? Here's A Quick Guide

How long should you keep your financial records?

Ever wondered how long exactly you should be keeping your financial records? What should you save and what should you shred? Well here's a quick guide on how long to keep your different kinds of financial records.

P.S. It's important to keep in mind that, if you don't feel comfortable throwing something out, you should definitely keep it!
 

Records to keep permanently / forever

Some records need to be kept forever just in case and these include important documents like:

  • Birth certificates / Adoption paperwork
  • Death certificates
  • Marriage certificates
  • Wills
  • Records of paid off mortgages on housing, land and other property
  • IRA contribution statements for non-deductible contributions to prove that you paid taxes

 

Records to keep for things that are active

If you have active contracts, loans or other financial obligations / contributions that are active, you want to keep those records indefinitely. Examples include:

  • Insurance documents
  • Contracts
  • Retirement plan contributions
  • Equity / stock records
  • Brokerage statements
  • Home improvement records
  • Property tax records
  • Ongoing debt repayments
  • Records for items associated to active warranties
  • Records for items that have not exceeded their return dates

 

Records to keep for at least 7 years

For certain records, after 7 years it is no longer necessary to keep them especially for things like paid off debts because 7 years is typically the time frame allowable for those items to be challenged. You can keep them longer if you choose. These record types include:

  • Tax returns
  • Tax related records e.g. alimony payments, charitable contributions etc


It's also important to keep these guidelines from the IRS in mind as it related to your tax returns (Guidelines pulled directly from IRS.gov):

  • Keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later, if you file a claim for credit or refund after you file your return.
  • Keep records for 7 years if you file a claim for a loss from worthless securities or bad debt deduction.
  • Keep records for 6 years if you do not report income that you should report, and it is more than 25% of the gross income shown on your return.
  • Keep records indefinitely if you do not file a return.
  • Keep records indefinitely if you file a fraudulent return.
  • Keep employment tax records for at least 4 years after the date that the tax becomes due or is paid, whichever is later.

 

Records to keep at least 3 years

  • Cancelled insurance policies
  • Records of property sales e.g. investments and real estates
  • Paid medical bills
  • Any documentation that you need for capital gains tax or to support deductions on your tax returns.

 

Records to keep at least 1 year

(Unless required for tax deductions then you'll need to keep them longer - see above)

  • Cancelled checks
  • Paycheck records
  • Bill payment records 
  • Bank statements

 

So where should you keep your financial records?

The most secure way is to scan and encrypt your records which you can store locally on a hard drive with an encrypted cloud back up.

If you are uncomfortable with digital copies, then you can keep paper copies securely in a locked safe that is both fire and water proof or you can put them in a safety deposit box in a vault at your bank.


Bola


Bola Onada Sokunbi

Bola is a Certified Financial Educator, money coach, finance writer, business strategist, social media influencer and founder of Clever Girl Finance, a platform that empowers and educates women to make the best financial decisions for their current and future selves and to pursue their dreams of financial independence in order to live life on their own terms.