How long to keep monthly statements from investment accounts?

[puglogic]

I still receive paper statements from my investment accounts, IRAs, etc. And they stack up and stack up because I am seldom interested in anything but the current one, which contains a month-to-month history.

How long do I need to keep these things? When is safe to shred them? I'm finding all kinds of different answers on the Web but thought I'd ask you what you do.

[junkman]

I still receive paper statements from my investment accounts, IRAs, etc. And they stack up and stack up because I am seldom interested in anything but the current one, which contains a month-to-month history. How long do I need to keep these things? .

You need to keep them for as long as you might need to access the information they contain that can't be recovered from other sources. Realistically, that's probably the rest of your life. So, do this. Keep the current year in your office filing-cabinet and bundle the rest of them together by each year, and stick them in the attic. In short, if you don't want to keep good records, then don't. But, also, be prepared to pay the consequences. And to that point I'll tell a story I've told before in this forum.

A couple years back, due the fact that I was trading a lot, the IRS came after me saying I owed them $285,00 in back-taxes. I knew they were wrong and sent a brief letter explaining why they were wrong. (One broker had reported my gross transactions to the IRS, but hadn't netted out P/L.) The IRS ignored my letter and said I now owed them $450,000 in back taxes and penalties. I laughed, of course, at the cascading errors. But I went down to the regional office and explained why they were wrong.

"No, no", they said. "Our computers can't understand your summaries. You have to do an entry and/or an explanation for each transaction."

Once it was clear to me just what idiots they were going to be about this, I saluted and followed orders. In all, I sent them 236 pages of documentation, in which, in several cases, I deliberately argued the opposite side of the question, because I wanted them to make a ruling on some tricky Chapter 11 workouts that even the IRS head office in Washington hadn't been able to give me an answer about. However, all I got back in reply from the appeals board was a letter saying that now I owed them $17 dollars due to some mistakes I had made (which I freely admitted I had made). In other words, once they could see they were going to lose this case, or at least, that it was going to cost them more money in man hours than they would recover in supposed back taxes, they backed away, just as they could have done from the getgo. Reportedly, only about 15% of tax-appeals are successful. I was one of them, because my records were complete and irrefutable.

So, in summary, I'd say this. Throughout the process, I was never treated rudely or unfairly. A bunch of people were trying to do a job whose complexity they hadn't been trained to deal with. I didn't prevail because I was persistent or clever or knowledgeable about taxes. I prevailed because my records were impeccable. That's why you keep paper copies of everything, and keep them forever.

[rodeosweetheart]

What Junkman said. I was audited by the IRS several years ago and did what he did--sent rafts of paper documentation about medical bills, and they went away. So I guess I was part of the lucky 15%.

Three weeks ago, I got audited by a state where we used to live, wanting a tax return for a year we did not live there. It was a case of their error, saying we had two dollars income from some hospital in Brooklyn--we did not live anywhere near Brooklyn and had no income from there.

That one was settled, too. I was mad--five years ago--I can barely remember where I lived, so I definitely need to keep the papers. What a pain .

[jp1]

I would concur, although my situation was much less severe.

I had a situation where a company I owned stock in had been bought out several years earlier. I'd missed this when filing my taxes that year because eTrade didn't list it on that year's 1099 as a stock sale. I got a letter from the IRS saying I owed tax on the entire sale amount since they didn't know the cost basis of what I'd initially paid for the stock. The tax difference was less then $1,000 since it wasn't a huge transaction, but still, being able to go back to my statement with the original purchase price was critical to avoiding an unnecessary amount of tax liability.

Thankfully that statement was available on eTrade's web site. At that time I was one of the casual, poor record keeping investors. I have always just monitored my accounts online and never actually looked at the statements. Now after that experience, every year when I do my taxes I take the time to download the prior year's statements. They, along with my tax returns, reside on my hard drive, on a backup hard drive at home, and on a cd-rom I make for the year which I store away from home (currently in a drawer in my desk at work.) Since they take up no real space I will likely keep them forever. I suppose if Adobe if stops supporting Acrobat i'll be in trouble since they're all pdf's, but I'll worry about that if and when it happens.

[Rogar]

I do not keep old monthly statements. I normally keep the most recent two months or so and shred the older ones. I keep all of my end of year brokerage statements for about ten years or so. And all of my buy and sell confirmations almost for ever. I don't have any of this on my hard drive, but assume I can access and get more hard copies from various places. This is apparently less than others, but it seems practical to me.

[chord_ata]

A variation on what Roger said.

If you will use the investment account cost basis valuation, then you don't need to keep the statements forever just to support your own cost basis valuation.

If you are lazy, keep the statements for seven years as IRS audit defense. If your year end statements can replace the monthly statements, keep the year end statements for seven years and your monthly statements for one year (until year-end).