Tips on How Long to Keep Financial Records


Over the course of a year, every American adult accumulates hundreds, or even thousands, of pieces of financial information which includes bank statements, investment summaries, medical or utility bills, tax documents, and paycheck stubs. While each piece of information is important to review, many people are confused as to how long you should hold on to each piece of information. The length of time that you should hold on to your financial records differs from one piece of financial information to the next.

The first set of financial records that need to be retained are tax documents including copies of your tax returns, evidence of tax deductions including mortgage statements and charitable donations, and copies of your W2 statements that you receive from your employer. All people should hold on to their tax returns and other documents for at least 6 years following the tax filing. These documents need to be retained because the IRS has up to three years audit your financial statements and six years if they believe that you significantly underreported your income. If you go through a routine audit and the IRS finds errors in your return, they may choose to go back and audit previous years.

You will also need to keep financial records for your retirement or brokerage accounts. All retirement accounts will provide you with both a quarterly and annual statement. It is suggested that you keep the quarterly statements until you receive the next annual statement. Depending on whether you can access these statements online, you may want to keep a copy of these statements until you eventually close the account. When you receive each quarterly statement for your IRA or 401k, you should ensure that the contributions stated match the actual amount you contributed.

All people should also keep their paycheck stubs for up to one year. When each paycheck stub is received, you should review it to verify that you were paid the proper amount and that all of the deductions on your check are legitimate. At the end of the year, when you receive your W2 statement from your employer, you should add up the paycheck stubs to ensure they match the W2 statement.

Another financial document which should be retained, and is frequently over looked by consumers, are receipts for key items. If you have purchased big ticket items, such as jewelry or art, you should keep the receipt forever. This is because in the event of theft or damage you will need to prove the value of the products to your insurance company. If you have made purchases that are tax deductible you will need to keep the receipts for 6 years in case of audit.

While it is quite important to keep financial documents on time for an extended period of time, it is just as important to properly store the documents. You should be sure to make copies of all your documents and store them in an organized file cabinet. It would also be a good idea to make electronic copies of the documents and store them on your computer.

This post was written by

jason – who has written posts on Budget Clowns.
Father of three and married to a lovely women. Always looking for ways to save money, and invest it properly for my children's future.

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