Your Guide to Financial Spring Cleaning

Spring is just around the corner! Now is the perfect time to start sorting through your official documents and reduce the clutter after tax season.

Organizing and preserving your official documents will save you time and effort in the long run, simplifying the financial planning process. While keeping detailed records is crucial for the well-being of your financial plan, it is equally important to discard your outdated records on a regular basis.

Given the wide variety of documents you have in your archives, you may find it difficult to determine which records you need to keep and how long you should maintain them. Here are some useful guidelines for maintaining your official documents.

Records to Keep for a Lifetime

There are numerous records that you should keep throughout your entire lifetime. In order to avoid damaging or misplacing these records, you should store these files in a locked safety deposit box or fireproof safe. You may also elect to store them electronically in a password-protected online vault.

Regardless of your method, make sure to preserve the following documents in a secure location that your loved ones will be able to access:

•Retirement plan and IRA adoption agreements

•Complicated tax returns (discuss with your financial advisor to determine which annual returns, if any, should be preserved)

•Social security cards and passports

•Birth certificates, marriage certificates, and death certificates

•Divorce papers or settlements

•Adoption papers

•School transcripts and diplomas

•Immunization records and records of any hospital stays and surgeries

•Military discharge papers

•Estate documents including wills, trusts, prenuptial agreements, advanced medical directives, do not resuscitate orders and other instructions

How Long to Keep Other Important Documents

While all of the above documents should be kept indefinitely, there are different retention guidelines to observe for your other documents. See the following list of suggested timelines for maintaining the rest of your key documents. Of course, you should check with your advisor to confirm that these guidelines are appropriate for your financial situation.

•Tax records including annual tax returns, W-2s, 1099s, cancelled checks, receipts, and the first two pages of Form 1040: Seven years.

Note: Tax returns can generally be audited for any reason for up to three years after filing; or up to six years if the IRS suspects underreported income. For this reason, it is wise to preserve all of your returns for at least seven years (and even longer if a specific return is complicated or unusual – discuss with your advisor for more details).

•Property records including deeds, titles, and loan and lease agreements: The entire duration of ownership plus seven years.

•Home improvement records including receipts, contracts, and records of cost: Until you sell the property and tax liability is settled.

•Insurance policies including coverages, policy numbers, and contracts: Life of the policy plus four years.

•Bank statements and deposit slips: Seven years.

•Charitable contribution documentation: Seven years.

•Investment records including investment purchase receipts, dividend reinvestment records, mutual fund annual statements and year-end brokerage account statements: The entire duration of ownership plus seven years.

Note: Most custodians will keep your cost-basis records for you.

•Savings bonds and accounts and support documents such as certificate of deposit, bank holdings, account numbers, and banker and branch information: The entire duration of ownership plus seven years.

•Credit card records: Keep statements for seven year; maintain receipts for one year after purchase.

In addition to observing these guidelines for record retention, you can further simplify your financial life by creating a master checklist of all your assets and liabilities. By doing so, you can ensure that you have all the official documentation to prove your portfolio holdings – and easily identify any information that is missing in your records.

Also, as mentioned earlier, you should always store your records in a secure location that is easily accessible for your family members and loved ones.

As a result of keeping your financial and legal records for an appropriate length of time, you will prevent many of the complications that can arise when managing your finances. Use this handy guide to make sure you are maintaining everything you need!