Question: I have recently started purging old files of financial information (statements, bills, receipts, etc.). I have heard that I should keep credit card statements for 7 years, but I was wondering: If the accounts are closed and there are no discrepancies on the credit reports, do I really need to hang on to these statements? Thanks for your insight. Alicia, Indianapolis, IN
Answer: Probably not. The 7-year holding period is for any credit card receipts that have to do with your taxes. You should keep those. The key is to hold on to bank statements, credit card receipts and the like, which prove you made a major purchase for insurance or tax reasons. You can shred receipts like grocery bills that don't have any long-term importance.
I'm not sure if you're going through everything, but to complete the thought, I would keep the paperwork on your retirement plans. Put the information into your permanent file. When you get your annual summary on the accounts at the end of the year, you can shred the quarterly statements. Your retirement plan and investment records are invaluable, especially if there is a dispute.
For instance, when my dad died, he had a small portfolio that was quite old. He hadn't added to it for a long time. When the major mutual fund company was contacted about the account after he died, an employee denied it existed. Well, my mom had all the paperwork to prove ownership of the retirement account. The mutual fund employee sheepishly admitted that they hadn't bothered to check their records at an offsite storage facility.
Fact is, the retirement plan paperwork doesn't take up that much room, and it's an invaluable part of your retirement security.
Similarly, since we're in tax season, I'll not only say you should keep your tax return records and supporting documentation for at least 7 years, but also that I would keep the actual tax return permanently. I learned this from a conversation with Ed Slott, the irrepressible accountant and IRA-expert based in Long Island. I was interviewing him several years ago and he told me that he keeps the actual return forever. "You can keep 50 years of tax returns and it wouldn't take up that much space," he said. "You could recreate your whole life from just the actual return."
Ed Slott's father found the habit useful. When he turned 65 in 1990, he applied for Social Security. He had worked his whole life. Social Security said he didn’t work in 1977. He didn't get a credit for earning an income that year. So, Ed's father brought his 1977 tax return to the nearby Social Security office. He was credited with the year. "You never know when you are going to need something like that," Slott said. "So I’d save the actual return forever."