Hang on
How long should you keep financial records?

Indefinitely keeping all receipts, statements, and other official papers is not the basis for a practical filing system. Pitching everything? Even worse. The key, then, is knowing how long to hang on to important documents.

Lifespan of tax documents
It would be nice if there were one simple time frame for hanging onto tax-related records, but come on—we’re dealing with the Internal Revenue Service here. The IRS generally has three years to audit your return. However, if you understate your income by 25% or more, they can audit you as late as six years down the road. A few specific situations exist for which the IRS recommends keeping records for seven years. (Beware, cheaters: There is no statute of limitations for when you might face an audit if you file a fraudulent return.)

The IRS itself states that a conservative approach is to hang onto all tax-related records for seven years from the return’s due date (or the date you filed if later than the due date). Some financial experts recommend stashing your tax returns—though not all the supporting records—in your file cabinet and forgetting about them, for some future unknown situation where you have to substantiate your income history.

Keep them forever more
Certain records, such as birth, marriage, and death certificates, and divorce, adoption, and settlement papers, should be stored indefinitely in a safe deposit box or fireproof home-storage unit. Current life insurance policies, wills, and vehicle titles are also good candidates for this kind of treatment.

In it for the short-term
The Federal Deposit Insurance Corporation (FDIC) recommends that a reasonable approach to saving canceled checks and credit-card and bank statements (other than those you need for tax purposes) is to save them for about a year.

Many records can be shredded as soon as you’re sure the transaction has been correctly recorded on monthly statements—again, as long as the record isn’t needed for tax purposes. ATM statements and credit-card receipts make this list.

A few thoughts before you say good riddance
If you rely on your bank’s, brokerage firm’s, or some other institution’s online records, make sure you know how long they maintain the files and make sure you will have access to the records for the duration
you desire.

When it is time to discard a document, put it through the shredder if it contains any information that could be used for identity theft, such as your social security number and account numbers.

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