IT’S EASY TO GET overwhelmed by the number of documents we receive over our lifetime. Paper copies take up space, and even electronic records necessitate computer storage. Either type requires a certain amount of time spent organizing.
The sheer volume makes the question of how long to retain records a perennial topic for newspapers, social media and podcasts. For instance, many folks have heard the advice that they should retain all documentation for seven years after they file their taxes. That’s sound advice when dealing with the IRS.
But there are reasons you might want to keep documents for more than seven years. The recent experiences of two friends illustrate why some records should be kept for far longer.
Tom—not his real name—was served with divorce papers after a long marriage. As he and his wife were working through the settlement, they were determining what assets they had acquired jointly and what each had brought to the marriage. Tom was trying to figure out the value of a 401(k) from 20 years ago, before they got married.
Over the past 20 years, the plan had three different administrators. None retained records from that era. I certainly can’t blame them. Each probably kept records for a few years, and then deleted them once they were no longer the plan’s administrator.
Tom was left to estimate the value of the 401(k) from decades ago. Unfortunately, his spouse had a different estimate. It took some emotionally draining meetings to reach an agreement.
Another friend—let’s call her Barbara—had once worked for a company and been there long enough to accrue a small pension. Every couple of years, she checked what the pension would pay upon retirement. Because Barbara’s salary and years of service were fixed once she left that employer, the estimate from the administrator never changed. Until this year.
Her old employer changed pension administrators. When Barbara checked on the pension amount, the new administrator gave an estimate that was one-third less than that of the previous pension administrator.
Barbara is now trying to gather records showing what she earned at that employer between 2002 and 2007, since those years of salary will determine the size of her pension. Unfortunately, she had thrown out her old W-2s and pay stubs because she had long ago filed taxes for those years.
My two friends’ experiences provide some justification for my habit of keeping many documents for far longer than seven years. Let’s face it: We never know when we might need some financial numbers from the distant past.
