10/12/2011 6:04 PM ET|
Junk you can toss right now
Are you holding on to paperwork 'just in case' it's needed? Know what you really need, and you can confidently shred the rest.
It can be tricky to figure out what paperwork you need to keep and what you can toss. Too often we cling to paper because we may need it "someday."
"It's all fear, baby!" said professional organizer Monica Ricci of Catalyst Organizing in Atlanta. "We often fear what we are unsure of or don't understand. . . . If you're uncertain about the value or whether you'll need it again, you tend to err on the conservative side and keep it."
That can lead to overstuffed filing cabinets and paperwork clutter that weighs on your psyche.
But so much of what we keep is really unnecessary. To relieve your soul, and your filing cabinets, here's a list of paperwork you can live without. Such as:
There's usually no need to keep these for tax purposes -- or any other purpose, for that matter.
But the tax man has to be paid eventually. When you take out the money, you typically pay taxes on the whole withdrawal -- none of it is sheltered. No amount of paperwork saved over the years will change that, so you might as well shred the statements and give your file cabinets some wiggle room.
One exception is when you make after-tax contributions to a retirement plan, such as those made to a Roth 401k. If you've made such contributions, your year-end summary should reflect that. Hang on to those so you can avoid paying taxes on the contributions when you withdraw them, and ditch the intervening statements.
You'll also want to keep the annual statements once you start taking withdrawals from the plans in retirement.
"Folks who are obligated to make mandatory withdrawals at age 70 1/2 and beyond may need to be able to prove the date on which their withdrawals started," said Los Angeles tax pro Eva Rosenberg, who blogs at TaxMama.com. "So I would try to get a printed or .pdf annual statement, showing the transactions for the year."
What about hanging on to the statements to see how your investments perform over the years? Well, you can do that, or you can use this newfangled thingy called the Internet to track the progress of your investments. Most 401k providers have all the information you'll ever need on their websites.
You'll need to keep more paperwork when it comes to your individual retirement accounts and Roth IRAs. Hang on to the following forms until your retirement accounts are emptied:
- Form 8606, which tracks your nondeductible contributions.
- Form 5498, which shows your annual contributions and the account's fair market value.
- Form 1099-R, which details any withdrawals.
If you're one of the dwindling number of people who are covered by a traditional defined-benefit pension, keep the annual statements indefinitely. Those can help you track down your retirement benefits, even if the company shuts down someday.
Old insurance policies
The usual advice is to ditch the old versions of your insurance policies once the replacements arrive.
But consumer advocate Amy Bach, the executive director of United Policyholders, thinks it's worth scanning and saving homeowners policies (although you can still ditch the paperwork once it's scanned). Insurance companies are constantly shrinking the coverage they offer, Bach said, and they may not give you adequate notice of changes to your policy.
"If you suffer a loss, and your current policy offers less coverage than you thought you had, and if you feel you didn't get adequate notice about the reduction in coverage, you'd have proof of the better, older coverage," Bach said. "After the Northridge earthquake (in Los Angeles in 1994), there was a huge settlement with Allstate homeowners who proved through their very good lawyers that they got inadequate notice of reduction in their earthquake coverage under their homeowners insurance."
VIDEO ON MSN MONEY
ALWAYS keep your insurance policies, especially for a business. Agents and insurance companies are only required by law to keep them for 10 years.
Long tail claims such as asbestos and pollution may have exposures going back decades, but unless you can prove that you had a policy and it provided coverage for such a loss, an insurer is not required to handle your claim if it's been longer than 10 years and it doesn't have your policy any longer. I know, I work for an insurance company and handle these kinds of claims. Also, be aware that ANYONE can be sued in this kind of lawsuit-even office supply companies and contractors are being drug into asbestos suits now, and you'll need your policies from the 70s, 80s and 90s to prove you had coverage because the current policies exclude such losses.
"It's better to have it and not need it, than to need it and not have it."
If there is an important document to keep, I scan the document into a PDF format, then store the scanned copy off on a USB drive and then I make backups of the USB drive and keep them in a safe place, like a bank deposit box or between the mattresses. Point here is to not destroy, but to find a way to keep them safe and out of the way of ID thieves. One point, I'd like to make is that it would be a good idea to password protect your scanned documents. If you cannot password protect the documents, then zip the documents and then password the zip file/s.
I was a poor soul who had my laptop computer stolen out of my house about a year and one half ago, and had some important records on that computer. I was uumb enough not to make backups of the files, which caused me undue consternation when it came to digging up the records.
I do like the advice about backing up on DVD. Personally, I trust this more than a memory stick, as memory sticks do fail, and when they do, you can be out gobs of data. From now on, I think that i will be doing, especially after the computer theft that I suffered a year and one half ago.
Unfortunately, furthermore, I do have to do a lot of travel in my job, and hauling around all those DVD's can be a real pain in the A$$, but if that is what you have to do, that is what you have to do. So be it.
What about considering a cataclysmic event where due to some natural disaster all electronic records are wiped out, including bank records! Maybe some solar eruption from the sun or some magnetic catastrophe (of course I am speaking out of scientific ignorance here).
Might want something printed to show what you actually had owned at one time. It seems that nowadays most money assets only exist in digital format.
Keepm your scanned stuff on an external disc. If something happens to you computer ( and it will), you are suddenly without your important papers you stored on your computer. And what if you didn't have electricity or means to have one. (I am referring to natural disasters.)
Eventhough, I had a computer after Hurricane Katrina, I didn't have electricity to run it. I live in interior Southeast MS. All of you who don't live in AL, LA, and MS, cannot imagine what Katrina done to the interior part of MS. No one could get there to take pictures of the divastation. No one could report on it. It was like a war zone. People could only get reports of New Orleans and the Mississippi Gulf Coast. So yes it is important to keep Insurance payment receipts, Insurance policies, and make sure you have the correct papers with you, should you have to evaluate from a storm.
As a banker I don't completely agree with this article. You probably should keep 401k statements for at least a year if you are intending to purchase a home or real estate soon. Your lender may want a copy to prove that you have the funds. Bank statements are the same, especially if you still get paper statements. Some lenders won't take the ones you print off of the bank website without a certification from the bank. It's not hard to get them certified but it takes time and some banks may impose a fee for this service, if you've got the originals its much easier on you. Your bank statements should always be available from your bank but they aren't always free to get copies, especially if you need to go back more than a month! I would advise to keep them for at least a year, put them in a binder and shred them one at a time after 12 months.
Also if you plan on selling a home soon, copies of the utility bills can be helpful to the new buyer to see how much they may need to budget for monthly expenses.
Also my insurance agent advised me to keep at least the two previous policies for my home and auto policies. I have found it makes it easier to see rate increases and coverages changes that I may otherwise have been unaware of.
About 3/4 down the page it states in part,..."generally" keep the crap for three years.
And if you are audited for say 6 years back and get a lawyer it is vague enough to win the case in court. Typically, the IRS will not audit past 3 years unless they have a serious case against you...and if it is serious enough you lose in a court of law...
Most of us are just common everyday rainy people...
Definitely hang onto your property title deeds...cause if you have reason to leave your home and when you return to find a family residing in your home, you will lose it...now this is based on EU history of wars and chaos. I keep mine with my go bag, just in case the far left gets way out of control.. ;)
This article is ludicrous!!!! It is worthless. And, I DO MEAN WORTHLESS. The risk of being audited essentially expires at 7 years? What does that mean, "essentially? " Parenthesis ( ), the IRS can audit you at any time if it suspects fraud, but such audits are rare. Give me a break!
You ppl go ahead and scan all you want on the computer and when the government takes over your computers, you have nothing because they are in control, not you!!!!! Do not be drawn into the foal! Paper docs RULE!!!! Go ahead and shred ,you lose, with no proof!
OKAY!! Then what about the outfits that buy old debts for a penny
on a dollar and try 2 collect 20 years later. And the gov't cant stop this scam?????
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