Documents: Store or Shred?

By John J. Ceparano, CPA/PFS, CFP®, M.TAX

Wealth Manager, Principal


Karl H. Graf, CPA/PFS, CFP®

Wealth Manager, Principal

Technology is increasingly important in helping to organize our lives. But some things are still done by pen and paper.

Many people still use file cabinets to organize paperwork and maintain important documents. However, certain documents that have been updated or replaced can be purged annually by shredding them. So as not to become “packrats”, it’s helpful to know which type of documents need to be retained vs. discarded. Here are some tips on what to keep, how long to keep it, and when you can shred it.

How Long Should You Retain Different Documents?

There are no hard-and-fast rules when it comes to organization and retention of your documents. But potential need and practicality can offer some guidance in managing them throughout your life. Here are some time frames and the types of records that fit well into each category:

Quarterly: Utility bills and credit card receipts for ordinary living expenses are good candidates to eliminate if you have paid the bills and no longer need them for potential product returns or billing disputes. In many cases these bills have the latest contact information for customer service which you may need from time to time.

Annually: You can shred certain redundant documents after you have prepared and filed your income tax return. These include:

  • paystubs (the final W-2 is important for your tax return, and you should keep this),
  • mortgage statements (redundant once you receive Form 1098 from your lender for your tax filing),
  • and checkbook registers (not needed if you kept important cancelled checks). Of course, you should retain any supporting documents you used to file your income tax return (see below).

When You Sell an Asset or Pay a Loan: Often it is best to retain documents until there is an event, such as an asset sale or a payoff of a loan. For example, you should keep car titles until you sell the car, as well as security purchase confirmations from your brokerage account until you sell the security.

Seven Years (for Tax Info): A good rule of thumb is to retain your income tax returns and any supporting documentation for seven years. Why? Seven years is long enough to cover nearly every situation that might require prior year tax records. The IRS recommends that you keep tax returns and supporting records until the statute of limitations expires.  The length of the statute varies by circumstance. For example, you have three years to file an amended tax return or file for a refund claim.  Other situations have longer statutory retention periods but retaining your records for seven years covers nearly every potential issue that can arise from a prior year tax return.1 Tax-related documents to retain include: W-2s and 1099s, large medical bills, disability records, charitable donation receipts, unemployment compensation records, and cancelled checks for deductible expenses.

Indefinitely: There are certain documents (originals) that you should never scrap; keep these in a safe place (preferably fireproof safe) in their original paper format. These include:

  • birth, adoption, and death certificates
  • passports
  • Social Security cards
  • health care proxy documentation
  • wills, trusts, and other estate planning documents
  • home improvement records (until property is sold)
  • insurance policies
  • power of attorney designations
  • marriage licenses or divorce decrees
  • military service and discharge records
  • medical and educational records

How to Keep Your Documents Safe

Scan and Backup: Scanning is one of the best ways to retain documents you want to keep while getting rid of the physical clutter. Document scanners for your computer are relatively cheap and efficient today and can be used to quickly convert hard copies into digital PDF files.

Shred Documents: When you are finished scanning your documents, do not simply toss them in the recycling bin. Buy a paper shredder (cross-cut shredders are suggested) and shred documents that may have your name, address, account numbers, or other important information on them that someone else could steal.

Use a Fire/Water-Proof Safe or Offsite Deposit Box: While unlikely, a fire or flood can ruin even the most organized home. It is good practice to keep your most permanent and hard-to-recover documents in safe storage. You also can use a removable hard drive to create a backup of important computer files and place it in an offsite safe deposit box. If you do so, remember to update that backup periodically and return the hard drive to your box.

Consider “Cloud” Storage: Saving documents in the cloud has become increasingly popular, especially as people have had to work remotely and share documents outside of the office. You can also use cloud storage for important personal and business documents to ensure they remain safe and separate from your home or office.

Invest in Cybersecurity Software: The conveniences of technology are not risk-free. Computer security is increasingly a threat to your activity and identity online as well as to the important documents you save on your computer. It is critical to make sure you have third-party anti-virus and anti-malware software on your computers and smartphones, both at home and at work. Change your account passwords periodically and use passwords that are not easy for cyber criminals to figure out (e.g., do not use your child’s first name and birthdate). Don’t forget to make sure to install updates to your anti-virus and anti-malware software as they become available. You might want to consider using the oversight or assistance of a qualified experienced cybersecurity computer professional for recommendations on software and installation.

Confide in Someone You Trust: It is important to tell a trusted individual where you keep your most important documents. In an emergency, someone may need to know how to access and retrieve your important documents.

The store versus shred decision can be both important and stressful. If you are feeling overwhelmed by paper, it may make sense to consider decluttering.


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