What Papers Should I Keep, For How Long?

Between the credit card bills, pay stubs, brokerage statements and bank records, I've got more papers than I know what to do with. What financial paperwork do I need to save and for how long, and what should be tossed out?

THE MIDDLE GROUND

It's hard to imagine life becoming paperless any time soon. So consumers need to find the right balance between cleaning house and retaining papers that could prove useful or vital later on. To make the most of that paperwork, though, requires not just keeping it, but organizing it, personal finance experts say. "What do I need and what will I need in the future?" said Barbara Steinmetz, a financial planner and tax preparer in Burlingame, Calif. "Saving (all) paper is absolutely no better than putting every single number in Quicken and never looking at it again."

PROTECTING YOURSELF

Still, there are fairly simple ways to help control the paper and protect yourself. If you're filing all this stuff neatly, then make sure to throw out the old as you file the new. Keep only the needed paperwork and toss out envelopes and enclosed marketing materials. To protect yourself in an emergency, store items like insurance policies in a fireproof safe and keep a core of essential paperwork in a box that could be moved quickly and easily in case of a DISASTER. When it comes to deciding what to hold on to, there are few fixed rules. But experts offer the following guidelines.

TAX DOCUMENTS

Save any of the paperwork needed to back up your income tax return for at least four years. The Internal Revenue Service can audit your return for three years after it has been filed -- four years after you've earned the income. Some experts say that's long enough to save W-2 forms, proof of medical expenses, donations and other items for which you may be claiming deductions, and other such items. But other experts say it is wise to retain such records for up to seven years, since the Internal Revenue Service can revisit your filing iF it believes there's been fraud, or that income has been substantially underreported.

PERSONAL PAPERS

Marriage certificates, birth and death records, social security cards and other personal documentation should never be discarded, and should be kept in a safe place

INVESTMENT RECORDS

Items like stock certificates can be turned over to a broker for safe keeping. Save brokerage statements, trade slips and similar documents until stock is sold, then follow same guidelines as tax papers to documents taxable gains, said Cindy Hockenberry, tax information analyst at the National Association of Tax Professionals. Without backup documentation, the Internal Revenue Service will determine the original cost to be zero, greatly amplifying the GAINS on which tax must be paid. Permanently retain paperwork related to the status of pensions and retirement benefits.

BANKING PAPERWORK

Generally, there's little need to hold on to statements or most canceled checks once they've been reconciled. Some experts advise holding on to these for up to a year, some for as little as three months. Save mortgage and loan documents until those loans are repaid.

BILLS

Save credit card bills long enough to check for accuracy, ensure you're credited for returns. Some experts advise retaining them for a year. It is also advisable to retain three months of utility bills, which are frequently required to establish place of residence in applying for a mortgage, library cards and the like.

PAY STUBS

Some experts advise retaining these for a year, then discarding and retaining the final stub showing total annual income.

RECEIPTS

Save those for major purchases until warranties expire. Save records of improvements to your home until it is sold, to document the size of the gain that may be taxable.

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