Record Retention Strategies: Which Financial Records Should You Keep, and for How Long?

Deirdre Jannerelli
 — Security
Financial records are vital for a number of reasons. They can help prove your identity, income, assets, tax payments, large purchases, and even your financial intentions after death. While ever-advancing technology can make it tempting to simply scan documents and go completely paperless, in some cases it’s important to keep physical, original copies of certain files. If you haven’t done so recently, now could be a good time to sort through your financial records and other critical documents to ensure they are properly safeguarded and/or disposed of. Let’s take a look at some of the various documents you should consider:

Critical Documents

Critical documents are records that contain important private information. These can include financial planning documents like wills and estate plans, as well as vital records like birth and marriage certificates. These types of records can have catastrophic consequences if stolen or damaged. Because of this, these documents should be kept in either a secure safe at home (a good rule of thumb is to use a safe that is rated for fire and explosions), or in a safe deposit box at a bank, in order to ensure their protection. Such documents include:
  • Property deeds
  • Social security cards
  • Trust documents
  • Insurance policies
  • Vehicle titles
  • Stock and bond certificates
  • Wills and estate plans
  • Personal property inventory
  • Marriage certificates and divorce decrees
  • Birth certificates
  • Military discharge papers
  • Passports
  • Death certificates
  • Adoption papers
These critical documents should never be kept in a simple drawer at home. Extra precautions must be taken in order to ensure they are intact and available when you need them. 

Other Important Documents

In addition to critical documents and vital records, there are many other important types of documentation that are helpful to have on hand. These can include items like tax documents, medical bills, pay stubs, canceled checks, and bank account statements. These types of documents should be stored in a secure, easily accessible place like a locked filing cabinet or drawer. How long you hang on to each one will depend on its purpose.

How Long Should I Keep My Records?

Financial records should be kept for as long as it is appropriate. Some documents will only need to be held onto for a short period of time while others will need to be secured for your entire lifetime. Consider the following guidelines:

Short-term (up to 3 years)

  • Household utility bills and medical bills (except those used for support tax deductions) 
  • Expired insurance policies

Medium-term (up to 7 years)

  • Tax returns and supporting information
  • Income and expense records (including lottery tickets and winnings)
  • Bank statements
  • Brokerage house statements
  • Canceled checks and check registers (checks for major purchases may be kept longer)
  • Paid-off loan documents
  • Personal property sales receipts

Long-term (lifetime)

  • Tax dispute records
  • Evidence of retirement plan contributions
  • Investment records
  • Medical records and medical history information
  • Pension/retirement plan documents
  • Social Security information

Other (as noted)

  • Home ownership/sale documents: 7 years after sale or indefinitely
  • Home improvement records: 7 years after sale
It’s important to remember that there are no concrete rules for how long financial records should be retained, and that the aforementioned timelines are simple guidelines. If you have the space, it will not cause any harm to keep all of your financial records for as long as you please. However, be sure to keep everything organized so you can easily find the documents you need when the time comes. A good rule of thumb is to keep documents organized by type and year. You can use separate folders, clips, or your preferred organization method to ensure easy access to your documents. 

Properly Dispose of Old Records

It’s important to remember that financial records should never simply be tossed into the garbage can. Doing so could put you at risk of having your sensitive personal and financial information fall into the wrong hands. Shredding is by far the most popular method of getting rid of sensitive documents. Paper shredders can be purchased at stores like Staples or Office Depot, or can be ordered online from sites like Amazon. Many communities also host free “shredding events” where residents can bring documents they’d like to shred. The website ShredIt.com allows you to search by zip code to find upcoming shredding events in your area. Another option is to utilize a dedicated shredding business, or an office supply store that offers shredding services. Both Rhode Island and the SouthCoast area of Massachusetts have many such options to choose from, including ShredRI.com, Staples, and The UPS Store.

Make Backup Copies of All Records

Lastly, remember that it’s always a good idea to make copies of your most important records. While certain situations will require you to have the original, physical copy of a document, in many cases it’s also beneficial to have a digital copy backed up. You can use financial management software to scan in and track your finances, or you can simply scan documents into your computer using a printer with scanning capabilities. Just remember that any digital copies should be kept in a secured area that cannot easily be accessed. One option is to keep your document backups in a password-protected folder on your computer. Another option is to save them to an external hard drive or flash drive and keep the drive in a locked safe or filing cabinet. Yet another option is to store your files using a secure cloud storage service.

Giving some thought to the organization and maintenance of your important financial documents will not only allow you to more easily locate them when you need them, but it can help ensure the protection of your identity and finances as well.