For the past several weeks, I have been providing step by step tips to help people become more financially organized in an area where most people are particularly challenged—maintaining financial documents. This week we’ll be talking about the year-end process to stay on top of all of those different kind of documents!
The Year End Process
In your Ongoing Document standing file, you’re going to need to do some weeding and maintenance.
Step One: Replace quarterly statements with annual statements.
You’ll receive year-end statements for the following:
- Pay Stubs (W-2)
- Investment Statements
- Retirement Statements
So you need to do just a bit more housekeeping with each of these:
- Pay Stubs (W-2) – When you receive the W-2, check it against your year-end paystubs. If they match, you can shred the paystubs and keep only the W-2 for your ongoing records.
- Investment Statements – When you receive the year-end statement for the account(s), keep that and shred the quarterly statements you have on file (assuming they jibe).
- Retirement Statements – same as above!
Step Two: Throw out old documents that you no longer need to retain.
I suggest you keep retention guidelines from the IRS Publication 552 in your file so that every year you can review them and weed anything out that you don’t need to retain! I think it would be cumbersome to create separate filing systems for each retention timeframe (maybe that’s just me being lazy). Read on to see how long to save which docs.
Catching Up Old Filing Systems
Are you trying to integrate your old filing system into this easier, more efficient new one? Here’s how I recommend you do it.
1. Schedule 15 minutes a couple of time a week for four weeks. Shorter, more concentrated bursts are better than longer sessions!
2. As you go through your files, make piles of the document by type using your Ongoing Document label guidelines:
- Pay Stubs & W-2
- Medical Bills & Policy Info
- Major Purchases
- Banking Statements
- Investment Statements
- Retirement Statements
- Tax Returns & Supporting Docs
- Sales & Home Improvement (resident, stock or mutual fund transactions)
- Satisfied Loans
3. Once you have the piles, go through each pile and discard old documents based on the IRS Publication 552 guidelines:
- Hold 1 Year:
- Pay Stubs & W-2 info. Some people don’t “trust” just keeping the W-2, so if you’re one of those, just shred paystubs after one year.
- Quarterly Investment and Retirement Account Statements.
- Hold 3 Years:
- Tax Returns & Supporting Docs
- Medical Bills & Cancelled Policies
- Home Sale Records & Home Improvement Receipts
- Stock Sale Records
- Old Investment Statements (hold 3 yrs after you sell/close the account)
- Old Retirement Statements (3 years after you close or rollover the account)
- Hold 7 Years:
- Satisfied Loans
- Hold While Active
- Insurance Policies
- Annual Retirement Statements
- Annual Investment Statements
- Property Records & Disputes (Major Purchases)
- Stock Records (cost basis)
- As Needed:
- Credit Applications (bank & credit)
For anything that I am not “sure” about as I do my filing (like a special document or something I don’t come across a lot), I have a manila folder with a question mark on it, and I shove the papers in there. If I can’t find specifically how long I should hold it, I just hang onto it in the folder and note the date. If I don’t need it after 7 years, I get rid of it!
As you work through your old filing system and identify things you want to retain, you can throw them into your Statements inbox and “officially” file those older documents the same time you would do your monthly Ongoing Document filing process.
ACTIONS THIS WEEK:
- Schedule small bursts of time to purge your old filing system
- Shred old documents
- Place documents you want to retain into your Statements inbox for future integration into your system.