When it’s time to declutter, the urge to toss every piece of paper clutter can be strong. However, before you start throwing things out, it’s important to know how long to keep bank statements and other essential financial documents. You might wonder, why does it matter? After all, it’s just paper, right? We completely understand that sentiment—especially when your organization skills are a bit lacking, and your home resembles a chaotic paper landscape.
However, there are certain documents that are crucial to retain for longer than you’d like. You’re not alone if you’re unsure about which receipts and records to keep for one year, three years, or even seven. According to recent data, this question garners nearly 1,900 searches each month. Some documents can be shredded without a second thought, while others need to be kept for a significant period—potentially saving you from headaches during tax season or other financial complications.
So, let’s break down what you should keep and for how long.
Bank Statements
Thanks to the convenience of digital banking, storing bank statements has never been easier. Still, it’s wise to keep a paper record, at least for a while. Generally, retain your bank statements for a minimum of one year. However, annual statements that are relevant to your taxes should be kept for at least seven years. Why? They serve as proof of income from interest-bearing accounts and illustrate tax-related transactions.
Past Tax Returns
Tax returns are another category that requires careful consideration. It’s recommended that you keep your tax returns for a minimum of seven years after filing. The IRS typically has three years to audit your return if they suspect errors. If they think you underreported your income by 25% or more, they have six years. Fraud investigations can lead to indefinite timelines. Financial experts often advise maintaining a permanent copy of each year’s tax return along with any payments made to the government, as these documents are vital for your financial history.
Pay Stubs
You don’t need to hold onto pay stubs indefinitely. Typically, keeping them for a year is sufficient—long enough to verify that your W-2 aligns with your earnings. Once confirmed, it’s safe to shred them.
Credit Card Statements
Credit card statements can sometimes be a stark reminder of overspending. Fortunately, you don’t have to keep them around for long. The general rule is to retain credit card statements for 30 to 60 days. However, if a statement includes a tax-related expense, keep it for seven years. Additionally, keep records of card closures for about seven years as well, especially if you’ve confirmed the closure in writing.
Canceled Checks
Similar to other financial documents, canceled checks can generally be shredded after one year, unless they’re tied to an IRS item. If they are, keep them for three years following the relevant tax year. For major purchases, like a house, you might want to keep those checks indefinitely or until you sell the property.
Bills
If you receive paper bills, you only need to keep them for one month. Once you receive the next statement confirming payment, you can toss them. However, if you’re self-employed and using certain home expenses as deductions, it’s best to retain bills for at least three years after filing your tax return.
Other Important Papers
Now you might be wondering about other assorted paperwork. Certain vital records should be kept forever, including birth certificates, citizenship papers, marriage licenses, and wills. Anything with an original signature or raised seal deserves a secure spot. For example, if you update your passport, keep the expired one for at least ten years for proof of citizenship and for sentimental reasons.
As for home improvement documents, retain them until you sell the property, plus an additional seven years. Brokerage statements can be kept for one year, but hang onto annual summaries for seven years. Medical bills should be kept for at least a year for potential insurance reference, and if you take medical deductions, keep them for three years.
What Can You Discard?
Fortunately, you don’t have to keep every single piece of paper. Short-term receipts—like those for groceries—can be shredded once matched with your monthly statements. ATM receipts and deposit slips can also be disposed of after reconciliation. However, retaining some receipts until tax season or for a few years afterward is always a safe bet, especially with modern digital receipt-keeping options.
Storage and Disposal Tips
Experts often recommend keeping vital records in a safe deposit box. However, a fireproof safe or lockbox at home is also a great option. Ensure that documents are stored securely and in a dry environment. For electronic documents, use password-protected files or trusted online storage platforms. When it’s time to dispose of paperwork, shredding is the best method to prevent identity theft.
If paper clutter is stressing you out, consider a filing system to organize documents by category—medical bills, banking, home improvement, etc. Stores like The Container Store and Staples offer excellent solutions, but don’t overlook local retailers like Target and Walmart for affordable options.
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Summary
In summary, while decluttering can feel liberating, knowing what to keep and what to toss among financial documents is crucial for your peace of mind. Keep bank statements for one year, tax returns for seven, and pay stubs until you’ve confirmed your W-2. Organize and securely store important records, and don’t hesitate to shred what you don’t need.
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