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If you want to retire early it is critical that your finances are organized. Effective management of your finances is only possible if you know exactly what you’ve got and how it is performing. One of the frequently asked questions when it comes to organizing your financial paperwork - is what to keep and what to throw away. So here is some good advice from  of Simple Things You Can Do To Improve Your Finances by Ilyce R. Glink.

1. Federal and State Tax Returns - Currently, the IRS may audit you three to six years after you have filed. They can only ask for receipts six years back but if they believe you intentionally hid income or filed a fradulent return, there is not statute of limitations. Glink recommends keeping all tax returns with back up information. If you don’t like Glink’s advice, consult your accountant and ask about a “document retention schedule.”

2.  Investment information - The three things you need to know about your investments are: how much you paid for them, how much you sold them for and what was the annual rate of return while you held them. When you buy or sell an investment, you will recieve something called a confirmation statement - keep this, you will need it later. You also need to keep dividend statements for stocks and mutual funds.

3. Retirement account records and pay check stubs - If you have been making contributions to an IRA these are the records you need to keep until you have withdrawn all funds from the account so that you can prove the amount of the non-taxable portion: Forms 1040, 8606, 1099R, and 5498 for each year that you made a contribution to the IRA (according to the current tax law). Keep pay check stubs until you recieve your W-2 form for the year. This will give you an opportunity to check for errors.

4.  Insurance policies - Keep the original insurance policy and signed contract for as long as you have the policy. Once the insurance is cancelled wait 2 years and then throw away the papers.

5. Trust and other estate planning documents - Keep trust documents and back up documentation as long as the accounts are active.



6. Medical Records - If you don’t have enough medical expenses to deduct  anything from your tax return, you can throw them away after you file the return. If you do claim a medical deduction keep them filed with the tax return as supporting documentation. Also if you have an ongoing medical condition or situation hang on to your records.

7. Credit Card receipts and statements - After you receive your monthly statement, you can throw away your receipts for that month’s purchases UNLESS you are in dispute with the store about the item, may want to return the item or have purchased a warrantly regarding the item.

8. Household Bills and Receipts - Glink says after you record your general household bills you can throw them away except for those for child care and tuition because these might help you qualify for a tax deduction. If you qualify for a deduction keep these receipts with your tax records.

9. Cancelled checks, ATM Receipts, bank statements - Keep copies of your account statements going back six years or possibly forever, Glink says. Again, check with your accountant regarding what their document retention schedule says if you can stand keeping all that paper. Cancelled checks can be discarded after one year unless they relate to tax deductions or capital improvements.

10. Mortgage, home equity loan, second mortgage and property tax records - Mortgage companies will send you a statement listing  the amount of interest you paid that year, and the real estate and insurance premiums paid by the company on your behalf, if they escrow your tax and insurance payments. You need that statement and your property tax bills for income tax preparation. Keep these documents with your tax records for that year.

11. Home purchase/sale and capital improvements - Hold onto these records forever as you may be required to prove at some time how you calculated your profits.

financial advice, financial management, financial freedom, financial sense, early retirement,organize,retirement,paper clutter

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