How Long Should You Keep Financial Documents?

Sorting through financial paperwork can be frustrating, especially when you are trying to decide what should be saved and what can be safely shredded. This guide is intended to make that process easier by outlining common retention timeframes in plain language.

Tax Records: How Long Should Tax Returns Be Saved?

General IRS Guidance for Tax Records

As a general rule, the IRS recommends keeping tax returns and related supporting records, such as W-2s, 1099s, and receipts, for three years. In many situations, this aligns with the IRS’s standard three-year statute of limitations for audits.

When You May Need to Keep Tax Records Longer

Although three years is the general guideline, some circumstances call for longer retention periods:

  • Keep for 4 years: Employment tax records should generally be retained for at least four years after the tax was due or paid, whichever date is later.
  • Keep for 6 years: If income was underreported by 25% or more, the IRS may have up to six years to audit the return.
  • Keep for 7 years: If you filed a claim related to a loss from worthless securities, such as stocks or bonds, or a bad debt deduction, keep those records for seven years.
  • Keep indefinitely: If you purchased property, keep documentation that supports the original purchase price. If a tax return was never filed, keep all related tax records indefinitely.

Investment and Loan Records

  • Original investment and stock certificates: Keep these documents for as long as the investment remains active, including Series I or E savings bonds.
  • Annual investment statements: Retain annual statements for seven years in case they are needed for tax or audit purposes. Once you receive the year-end statement, monthly and quarterly statements can typically be discarded.
    • Keep records tied to the purchase of an investment for 3 years after the investment is sold. These records may be important when calculating capital gains or losses, or if questions arise during an audit.
    • For inherited investments, keep documentation showing the fair market value and any information used to establish cost basis.
  • Loan statements and documents: Keep current loan records showing the most recent balance. After a loan is paid off, retain the final statement or satisfaction record for 7 years.
    • Mortgage: If you still own the property, keep fully paid mortgage documents indefinitely.
    • Car loan
    • Student loan
    • Personal loan

Bills, Receipts, and Pay Stubs

  • Bank statements and canceled checks: Review monthly statements to confirm your transactions. In general, keep statements for one year, unless they support tax filings. If they are tax-related, keep them for 3–7 years.
  • Pay stubs: Keep pay stubs for one year, unless there is a dispute. After comparing them to your W-2 and annual Social Security statement, they can usually be discarded.
  • Medical bills: Keep medical bills for one year, unless there is a dispute or they are needed for tax purposes. If tax-related, retain them for 3–7 years.
  • Household bills: Utility bills, credit card statements, and receipts for smaller purchases generally only need to be kept until you have reviewed them, confirmed the charges are accurate, and verified payment was processed. Keep them longer when:
    • They support tax deductions, in which case they should be stored with the corresponding tax documents.
    • They relate to an item that is still under warranty.

Personal and Legal Documents

The following documents should generally be kept indefinitely. If a legal document has been updated, the older version can usually be shredded. Original documents should be stored securely, but in a place trusted loved ones can access if necessary.

Personal Documents

  • Birth certificate
  • Marriage certificate
  • Divorce decrees
  • Adoption papers
  • Death certificate
  • Citizenship papers
  • Military records
  • Diplomas
  • Health records
  • Passports

Legal Documents

  • Power of attorney
  • Legal filings
  • Retirement and pension plan documents
  • Prenuptial agreement
  • Guardianship papers
  • Medical directives
  • Trust documents
  • Wills
  • Living wills
  • Beneficiary forms

Property Records

Keep records related to the purchase of property for as long as you own it.

  • Deed
  • Titles
  • Record of paid mortgages
  • Home improvement receipts that may help establish cost basis for tax purposes should be kept for seven years after the property is sold.
    • Records documenting property repairs should generally be kept for at least as long as you own the property.
  • Warranty documents should be kept while the warranty remains active, or until you no longer own the item, whichever comes first.

Insurance Policies

Keep insurance policies for as long as they are active. Once coverage has ended, the policy documents can usually be discarded, though you may want to keep the final statement for your records.

  • Life
  • Liability
  • Homeowner/rental
    • Maintaining a written, photographed, or video inventory of your property can be helpful in the event of a major loss.
  • Auto
  • Annuity contracts
  • Health

Keeping or Disposing of Documents

Roughly once every 18 months Prosperion offers a complimentary shredding day for clients. Keep an eye on your email for an invitation to securely destroy old documents.

For routine paper disposal at home, a personal shredder is a practical option for documents that contain sensitive information.

Storing Important Paper Documents

Many paper records can be stored in a locked filing cabinet. For your most important documents, however, a home safe may be a better choice. Consider a safe that is fireproof, waterproof, and capable of being bolted to the floor or wall so it cannot be easily removed.

Safe deposit boxes may also be an option for offsite storage, though they are not offered by every bank. Access can also be limited by the financial institution’s hours and policies, and depending on how the box is owned, the contents may be subject to probate.

Digital Storage Options to Reduce Paper

Digital storage can help reduce clutter and make documents easier to organize. Storing everything only on a computer is not always the most efficient or secure approach. External hard drives or flash drives may be helpful, especially if you keep more than one backup in case a device is damaged.

Cloud-based storage is another option. It can save space, help organize documents, and may provide added security through encrypted networks. Many providers also allow access from mobile devices, making important documents available from almost anywhere.

Our firm uses WealthVision and The Vault to securely store client documents. Speak with your advisor about setting up or accessing these services.