A Handy Records Retention Guide from The Good Housekeeping Institute

SAVVY CONSUMER: The paper trap:
What to keep, what to pitch?
Good Housekeeping Institute
Saturday, April 16, 2005

Now that the deadline for filing your income tax returns is past (or you've filed for an extension), it's a great time to take stock of your financial records and clear out the paper clutter in your home.

Here's what you should keep and what you can toss forever, courtesy of the new Good Housekeeping book "The Complete Household Handbook" (Hearst Books, $24.95):

Tax returns: After filing a tax return, keep substantiating records --- tax returns, canceled checks, receipts for deductible expenses --- for at least seven years. The Internal Revenue Service has three years after the year of filing to audit a return; six years if the taxpayer omits more than 25 percent of gross income; and unlimited time if fraud is found.

IRA contributions: You'll want to keep these records permanently. This is especially important for nondeductible IRA contributions since you might need to prove that you already paid tax on the money at the time you withdrew the cash.

401(k) and other retirement-plan statements: Keep your quarterly statements until you get the annual statement. Then you can discard the quarterly statements. Hold on to the annual statements until you retire or close the retirement-plan account.

Bank records: At tax time each year, sort through your checks and keep the ones for deductible personal expenses, home renovations, business expenses and your mortgage. Then toss the rest.

Brokerage and mutual-fund statements: Be sure to hang onto all purchase and sales slips. This way, you can determine your gains and losses for tax purposes. As with retirement plans, keep your quarterly brokerage and mutual-fund statements until your annual statements arrive, and keep end-of-year statements indefinitely.

Bills: The only ones you really need to keep are for large purchases such as home computers, jewelry, cars and antiques.

They'll come in handy if you need to prove the value of your belongings for insurance purposes.

Credit-card receipts and statements: You should keep the receipts until you get your monthly statement. Then you can discard the receipts, if everything matches up. Hold on to your credit-card statements for seven years for tax purposes if they have business expenses on them.

Paycheck stubs: You really need to keep these for only a year.

Home-related documents: Indefinitely keep records showing the purchase price, the cost of home improvements and expenses for buying or selling the home. These will be useful for tax purposes when you sell. Keep these records even after selling your house.

Insurance policies: Hold on to these as long as the policies are still in force.


To Shred or Not To Shred?

Although you might be tempted to shred everything --- or nothing --- here are the top five items you should shred in order to protect your financial information:

• Anything you don't need that lists your Social Security number.
• Unsolicited credit-card offers.
• Credit-card statements and checks you no longer need.
• Bank, brokerage and mutual-fund statements you no longer need.
• Insurance claim forms you no longer need.

Where To Keep Important Papers

It's important to organize your financial and personal records well. Use these guidelines to help determine where to keep your valuable files.

Where: Carry with you
What to keep there: Personal ID, auto-insurance card (keep in your car), credit cards, debit cards, ATM cards, driver's license, car registration, health-insurance card, medical information, physician's ID card

Where: Home files
What to keep there: Checking and savings account info, credit records, employment records, estate-planning info, health info, household furnishings/appliance records, housing records, income-tax records, insurance records, investment records, privacy statements from financial institutions, vehicle info

Where: Safe-deposit box
What to keep there: Appraisals, photos, receipts of valuables, inventory of household goods, cemetery-plot papers, contracts/leases/notes, jewelry, list of insurance policies and agents, military-service records, mortgage documents/title and deeds, motor-vehicle titles/purchase receipts, personal records for all household members, Social Security card, stock/bond/mutual-fund certificates and purchase/sales receipts, tax assessments and records of home capital improvements, wills.