Document Retention – (Q & A)

May 2016


Q Dear Rick:
I’ve lived in my house for about 20 years and I will be moving in another month or so. I’m the type of person who has saved everything and now that I’m beginning to pack I realize that I don’t need to save everything. I have 20 years of utility bills, cable bills, brokerage statements and tax returns. In addition, I have also saved just about every receipt I’ve ever received along with every bill I’ve gotten. I would like to throw a lot of this stuff out but I’m not sure what I really need to keep or not. Hopefully, you can give me some direction.

A Dear Fred:
When it comes to document retention, sometimes the old adage less is more applies. In many situations, people save so much stuff that if they ever needed to find something they wouldn’t be able to do so. Therefore, you only want to save what you truly need.

The first area I would look at is recurring-type bills. For example, cable and utility bills; bills that you generally receive every month or every quarter. With these types of bills I only save the last bill. When I get the new invoice for these types of recurring bills, I check it for accuracy and then shred the last month’s bill. Therefore, in your situation you can shred 20 years of cable bills and utility bills. There is absolutely no reason to retain them.

I also follow the aforementioned strategy when it comes to charge card bills. Whenever I receive a charge card bill, I review it for accuracy and then shred the old one. The one exception is if you have a charge that would qualify for a tax deduction on your charge card bill. For example, you may have charged a charitable contribution. In those cases, I would add that bill to my tax file for the current year.

The one area that people are always nervous about when it comes to document retention is tax returns and the supporting documentation. In the great majority of situations, the IRS can audit you only up to three years from the time you filed your return. Therefore, for most people who would have filed their 2012 tax return by April 2013, unless there is fraud involved, the IRS can only audit you for your 2014 and 2015 returns.

Although, the IRS can audit you up to three years from the time you file your return, I generally recommend people keep their returns and the backup documentation for seven years. After that you can get rid of your back up documentation and you can also shred your return as well.

When it comes to brokerage statements, like the statements from Fidelity, Schwab or Vanguard, once again, in today’s world there is very little reason to save those documents for any length of time. Whether you get quarterly or monthly statements, when you get the newest statement it’s time to get rid of the old statement. In that regard, when you buy a new stock or mutual fund it is important to keep track of the purchase date and what you originally paid for the investment.

When it comes to spring cleaning and getting rid of unnecessary documents, my advice is that you just don’t throw this stuff away but rather, you shred it. You have no idea who is going through your garbage and as far as I’m concerned, why take the chance that someone can get sensitive information from you. Therefore, when it comes to getting rid of financial information or tax returns, shredding is the only way to go.

For any recordkeeping system to be effective you have to be able to locate a document in case you need it. I believe that when you save every piece of paper there is no way you will be able to find a document if needed. Therefore, everyone should consider pruning their records. You don’t have to save everything anymore because after all, whether it is mutual fund statements, charge card bills or even utility bills, you can always get a duplicate from the company.

On the next rainy day when you’re sitting home with nothing to do, why not go through your files and begin to prune them. I think once you do you’ll agree with me that less is more.

Good luck!

Rick is a fee-only financial advisor. His website is If you would like Rick to respond to your questions, please email Rick at