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How Long to Keep Financial Records

Posted on June 18, 2020 by John Posey

If you’re like me, the last thing you want to do is file personal financial records. Heck, I do enough of that at my day job! But it’s one of those things a responsible adult has to get around to eventually. Given a lot of us are stuck at home these days, I assumed this info could come in handy alongside the usual to-do projects.

Do you know how long you should keep your financial stuff? Here’s a good article on the subject that can serve as your quick reference. I made the transition to filing everything electronic quite a few years ago and I’m glad I did. Not only is it easier to find stuff, but I don’t have to go to the basement and dig through a box of folders. I admit it can be hard to give up those three-ring binders, but I’m never going back. Whatever your preferred method, to each their own – the important part is just to do it.  You’ll find that the article attached recommends keeping three years of tax returns. Just keep in mind that as a general rule the IRS has a ten-year statute of limitations on collections of unpaid taxes (exceptions can apply). The other document I get asked about often is how long to keep your investment account statements. I would side with the 3-year standard as suggested in the article. If you want to pare down the number of documents you’re keeping, the December 31st statements from prior years would be the most useful to hold onto.

By far the most painful record to find for my clients historically has been cost basis information,  i.e. - what you originally paid for the investments you own. This is only necessary to have for non-retirement accounts and has become much less of an issue since new cost basis regulations went into effect in 2011 requiring investment custodian firms to keep track of it (it used to be your sole responsibility before that!). It may be less likely now that you have an investment account missing cost basis info, but if you happen to run across a statement that reports cost basis as “unknown” or it is omitted in some fashion you may want to investigate further. It only becomes a factor if you sell an investment that lacks cost basis information. If this happens then you, your advisor and accountant get to have fun trying to figure it out for tax purposes.

Happy filing!

PS - For those of you open to using technology, you might look into a product like Evernote for saving and archiving things. I haven’t used it personally but I am intrigued by the idea.

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Advisory services offered through Plains Advisory LLC, an investment adviser registered with the State of Nebraska. Insurance products and services are offered and sold separately through John Posey, a licensed insurance agent. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Any information provided is designed to provide general information on the subjects covered, it is not, however, intended to provide specific legal, tax, financial or investing advice and cannot be used to avoid tax penalties or to promote, market, or recommend any plan or arrangement. Material presented is believed to be from reliable sources and no representations are made by our firm as to another parties’ informational accuracy or completeness.  All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.