How long should you keep financial documents?

June 1, 2011

It is important to be cautious when discarding important documents that could be required by the IRS in the event of an audit or would enable you to collect a future refund should you need to file an amended tax return.

Key Points

Q How long do tax and other financial records need to be retained?

You should keep records, including the date, number of shares, and price paid of your stock and fund purchases, for as long as you hold those investments. Retain the year-end statements that show reinvested dividends and capital gains distributions so you don't pay taxes on the same investment twice when you sell the stock or fund.

Generally, you should retain your real estate documents for as long as you own the property and, after you sell it, for the statute of limitations period that applies. You'll need this information to determine depreciation for home office or rental purposes (if applicable), as well as any taxable gain if you sell. Also, keep records related to your purchase price, refinancing a mortgage, settlement or closing costs, the cost of improvements, casualty loss deductions, and insurance reimbursements. Save proof of deductions that are taken over more than 1 year.

As for smaller items, you can shred your ATM receipts as soon as you reconcile them to your bank account.

When you do decide to throw away any financial documents, be sure to shred them to avoid identity theft. If you need help deciding which documents to retain and which to destroy based on your own specific situation, be sure to contact your tax adviser for assistance.

Q. What is the difference between global and international investing?

A Global investing implies investments made anywhere in the world, including the United States, while international investing excludes the U.S.

The international investment market is further segmented into emerging markets, frontier markets, and developed markets (such as the United Kingdom and Germany). Emerging market countries are those experiencing rapid growth, such as Brazil, Russia, China, and India. Countries in frontier markets typically have a lower market capitalization and are less developed than emerging market countries. Examples of these less industrialized countries include Argentina, Croatia, Nigeria, Kuwait, and Vietnam.

International investing does pose unique considerations and risks. The value of the local currency compared to the U.S. dollar can impact yield, and fixed-income investments (bonds) also add the risk of sovereign debt. Emerging markets in countries with unstable governments or immature economic infrastructure pose geopolitical risk. International securities may also be less liquid than U.S.-based securities, and even more so in frontier markets.

Joel M. Blau, CFP, (top) is president and Ronald J. Paprocki, JD, CFP, CHBC, is chief executive officer of MEDIQUS Asset Advisors, Inc. in Chicago. They can be reached at 800-883-8555 or blau@mediqus.com
or paprocki@mediqus.com
.