Every spring at RegentAtlantic, we host a Shred Day for clients and friends of the firm. As a Wealth Advisor, around this time of year between tax filing and spring cleaning, I am often asked, “Do I need to keep this?” by cautious clients who are eager to declutter. Even with the proliferation of electronic delivery, we are inundated with paper on a daily basis – junk mail, bills, receipts, statements, and notices.
When it comes to decluttering, financial and legal documents are among the most important paperwork to understand and differentiate what needs to be filed away, and what can be disposed of – securely. Seniors are frequent targets of identity theft, and while cybercrime has increased exponentially, thieves are not above old-fashioned “dumpster diving” to acquire paper records. According to the Federal Trade Commission (FTC), for example, a thief may retrieve a medical bill from the garbage and pose as the medical office requesting additional payments. They may reach out by phone or even email.
Account Statements and Transaction Confirmations
It’s likely that you receive account statements and trade confirmations either by paper, electronic delivery, or perhaps a combination of the two on a monthly or quarterly basis. Prior to 2011, most brokers reported account cost basis as a courtesy, and investors were required to keep detailed records of their purchases and sales, sometimes for decades during which companies may have split, merged, or been spun-off. Congress created the concept of “covered” and “noncovered” securities beginning in 2011 when brokers were legally required to begin tracking and reporting cost basis. As a result, you don’t need to keep account statements and transaction confirmations for more than a year unless they pertain to pre-2011 noncovered securities the custodian doesn’t have a record of.
As a best practice, you may wish to keep year-end statements to track the value of your accounts and financial progress over the years. Your bank and account custodians should have electronic copies of statements available to download even if you opt for paper delivery, and electronic statements can cut way down on paper clutter. I typically recommend electing for paper delivery of tax documents for your convenience and to save paper and toner. Typically, however, you can also download electronic copies of 1099s online for the fastest access.
It’s important to keep a record of all insurance documents for policies and products while they are active. This includes copies of insurance policies for health, life, long-term care, and property and casualty insurance.
Health insurance tends to generate a lot of paperwork, including Explanation of Benefits related to claims. The FTC recommends holding onto medical bills for one year before shredding, unless there is a unresolved dispute.
If you have a Health Saving Account (HSA) and do not itemize medical deductions, then we recommend keeping a copy of unreimbursed medical expenses. You can invest your HSA account on a tax-free basis and reimburse yourself either for future medical expenses or accumulated, unreimbursed expenses that you maintain a record of as long as you did not previously deduct them.
Bills and Receipts
Generally speaking, you don’t need to keep a copy of monthly bills and other receipts once they’re paid. You may want to hold onto bills until you see that your account has been credited. The main exceptions to this are receipts that are tax-related, such as charitable giving, or for items that have a warranty which would require you to provide proof of purchase to file a claim.
Tax Returns and Supporting Documentation
Tax returns fall into the “keep forever” category of financial records. The IRS has 3-7 years to audit a tax return, so it’s recommended that you keep all tax-related documentation, tax forms, and receipts, for at least 7-10 years.
Home improvements are one of the more common tax-related items that require long-term recordkeeping. When you sell your home, your cost basis includes the initial purchase amount and capital improvements that increase your basis. Common examples of improvements include additions, heating and cooling systems, retaining walls, siding, and kitchen and bathroom renovations. Regular repairs and maintenance that keep your home in good condition, but don’t add to its value, are not considered capital improvements.
Like tax returns, legal documents fall into the “keep forever” category and, when in paper form, should be kept in a secure and fireproof location. Important legal documents include Social Security cards, marriage and death certificates, passports, deeds and titles, and estate documents such as wills, powers of attorney, and trusts. Safe deposit boxes and fireproof safes are often used to safeguard legal documents and other valuables.
These are some of the most important financial documents you should be mindful to retain. Otherwise, most other paperwork such as credit card offers, bills, receipts, and statements can and should be safely discarded at least annually. When in doubt, err on the side of caution and hold onto your files longer. You can always reach out to Jim at email@example.com and Melissa at firstname.lastname@example.org with your specific questions.
Important disclosure information
Please remember that different types of investments involve varying degrees of risk, including the loss of money invested. Past performance may not be indicative of future results. Therefore, it should not be assumed that future performance of any specific investment or investment strategy, including the investments or investment strategies recommended or undertaken by RegentAtlantic Capital, LLC (“RegentAtlantic”) will be profitable.
Please remember to contact RegentAtlantic if there are any changes in your personal or financial situation or investment objectives for the purpose of reviewing our previous recommendations and services, or if you wish to impose, add, or modify any reasonable restrictions to our investment management services. A copy of our current written disclosure statement discussing our advisory services and fees is available for your review upon request.
This article is not a substitute for personalized advice from RegentAtlantic. This article is current only as of the date on which it was sent. The statements and opinions expressed are, however, subject to change without notice based on market and other conditions and may differ from opinions expressed in other businesses and activities of RegentAtlantic. Descriptions of RegentAtlantic’s process and strategies are based on general practice and we may make exceptions in specific cases.
RegentAtlantic does not provide legal or tax advice. Please consult with a legal and or tax professional of your choosing prior to implementing any of the strategies discussed in this article.