Safekeeping of Personal Finance Documents

[This post is written and copyrighted by FIRE Finance (http://firefinance.blogspot.com).]

July 29, 2009: We all have our own system of keeping records such as bills, tax returns and statements. They are either stored in a file cabinet or as scanned images on data CD/DVDs or perhaps in shoe boxes. That is pretty good as long as the system works for us. But the most important question that arises with respect to archiving is "How long do we need to store them?"

We have developed a chart that might help us figure out the answer to the above question.

What Should I Save?	Reason To Save?	For How Long?
Family and Identity: Passports, marriage certificates, birth certificates, copy of will, estate planning documents, alien registration cards, social security cards, beneficiary documents.	» Helps establish identity, settles disputes on ownership & inheritance. » A must have for numerous official and legal matters.	» Forever.
Qualification: Degree, transcripts, trade certifications, professional licenses.	» Establishes education history, required for getting jobs and other career needs.	» Better if stored forever or at least until retirement.
Insurance: All sorts of insurance policies - auto, home, renters', life, long term disability, short term disability.	» Enables us to file claims.	» Until policy expires. » We may want to keep just the previous (to current) health/auto insurances to demonstrate continuous coverage.
Property: Records of house loan/purchase and ownership, home improvements, auto loan/purchase and ownership, auto maintenance records.	» To figure out the cost of a house for tax purposes or sale. » Helps in doing proper and timely maintenance of the automobiles and fetching a higher resale value.	» Until house is sold. » For autos, keep till the automobile is sold, grounded or donated.
Bills and Expenses: Credit card statements, utility bills, phone bills, receipts for major purchases, medical bills.	» For insurance or warranty claim of lost, stolen or defective articles. » Establishing home address and residency. Disputing fraudulent charges. » Doing itemized deduction for tax returns. » Claiming refund from health savings accounts.	» Many people advise to keep only those bills that are related to tax and shred the rest. However we feel these should be stored forever as well. We never know when these may come in handy. » For example, Uncle Sam has agreed to refund federal excise taxes on landlines, wireless or VOIP services for period after Feb. 28, 2003 and before Aug. 1, 2006. Without the bills we may have to settle for lesser amounts in deduction.
Savings and Investments: Bank, brokerage and IRA statements.	» To figure out taxes and identify tax-deductible contributions. » To compute performance of our portfolio and determine asset allocation. » Helps in financial planning.	» As long as investments are owned. » For IRA we should keep them till accounts are open.
Taxes: Tax returns and associated documents.	» To claim refunds, amend returns, prepare for IRS interviews and financial planning.	» Seven or more years. » IRS may challenge us to show or prove last six years' tax returns. » However for fraudulent cases there is no time limit. » You can get more information here.

We hope that our chart will help you organize and trim your archives. It has proven very useful in keeping our archives in a manageable shape which is easy to maintain.

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