By Roberta L. Nestor
In this new paperless world, how is it we still manage to accumulate so much paper? Magazines, newspapers, junk mail, flyers, brochures, receipts, bills, tax returns, bank statements, credit card statements, ATM printouts, medical bills…how can we de-clutter our lives of paper? What documents can be shredded, which ones should we keep and for how long?
The first principle for eliminating paper is organization. It’s the old adage of “a place for everything and everything in its place”. Start with creating places where the paper will go, what will you store the paper in? It can be a box, a small filing cabinet – a basket, but one place where all the paper will go. Do not put junk mail in this paper storage unit, junk mail and flyers should be disposed of and put in recycling on a daily basis.
Next you should create some files or paper storage places for:
- Immediate Action – these are your current bills and/or correspondence that needs immediate attention. While holding immediate action papers in a file that you attend to on current basis is great, placing your bills on auto bill pay is an even better way to alleviate unwanted paper.
- Short Term Action – this might entail school calendars, schedules, appointment and events that might have to be put on your calendar. These are paper items you want to read and review, but the timing of it is not critical.
- Long Term Action – these may consist of multiple files that would include official documents, tax returns and some of the items listed below.
Let’s review what you should be holding onto and for how long:
- Sales Receipts do not need to be retained unless needed for tax purposes and then keep for 3 years.
- Utility Bills can be thrown out after one year unless you are using these as a deduction for a home office, in that case you should keep them for 3 years.
- Cancelled checks, credit card receipts and bank statements only need to be kept for one year, unless needed for tax purposes, then keep for 3 years.
- Quarterly investment statements can be shredded once you receive your year-end statement. You should keep all of your annual investment statements (for retirement and non-retirement accounts) as long as you own the investment and then, for 3 years after you sell the investment.
- Income tax returns – while you are only required to keep these for 3 years, it is highly recommend to keep any tax return that contains information or transactions involving investments or that involve any home deductions (improvements) as long as you still own these assets.
- Medical bills, records of selling a home, records of selling a stock or investment should all be kept for 3 years.
- Records of satisfied loans should be kept for 7 years
Then there are those important records that should always be retained while active. Things like insurance policies, stock certificates, property records, home improvement records and records of pension and retirement plans. A great rule of thumb would be, “if you still own it – maintain the documentation.” If you are not sure, ask your tax or financial professional. Keep in mind April is Earth Month and several local businesses sponsor free shredding services so you can be sure your important documents are being disposed of properly.
Roberta L. Nestor is a financial advisor practicing at 491 New Haven Avenue, in Milford, CT offering retirement, long term care, investment and tax planning services. She also offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network – a member FINRA/SIPC and a Registered Investment Adviser. She can be reached at 203-876-8066 or firstname.lastname@example.org. This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Investors should consult a tax preparer, professional tax advisor, and/or a lawyer.