Electronic Delivery & Record Retention

How do you get your statements and how long you need to keep them.

Do you remember not long ago there were articles that with the advent of computers that we were moving to becoming a paperless society.  What in fact happened was that we have even more paperwork in our modern world. The computer has made it easier to print, so we can become buried in paperwork. But that is now changing; many of us have the options of receiving less paper and more electronic or digital files.

Typically when you opt to receive digital files you receive a notification via email when a new document is available. You can view it, and then either store it in a multitude of ways or simply delete it.

People ask us all the time, what do I need to keep, and what can be thrown out or deleted? Space is becoming an issue for a lot of people; their file cabinets and inboxes are full and they don’t know what to do.

Before we discuss what to keep, we want to warn you that any documents or statements that are discarded need to be shredded. Identity theft is only getting worse so protect your self at every opportunity.

The motives behind record retention are threefold. First, you want to be able to track where you are financially, and how you got there. We suggest that everyone should make an annual report of assets and liabilities. At Lineweaver Financial Group, we provide consolidated reports for our clients, so all of their accounts are listed on one statement, and they also have the ability to view this online 24/7.

Secondly, you need to know how your investments are performing so that you can compare your performance, or that of your advisor, to some benchmark. By comparing your performance to a benchmark, you will know if you are doing great, just OK, or poorly.

The third motivation for retaining records of your financial affairs is for tax reporting.

Unfortunately to have accurate records you are going to need to keep lots of records. Maybe you had better think about another filing cabinet or an electronic storage method with redundancy.

You must keep copies of all confirmations or statements showing the purchase of all investments. These records need to be kept at least three years after the sale of the investment. It doesn’t satisfy the IRS to just have the date and the cost, they like the paperwork, or digital file, evidencing the transaction. Utilizing financial software such as Quicken can make this tracking easier for the future.

Keep records of how you acquired any securities, whether they were purchased, received as gifts, or inherited. Keep the cost basis of the acquisition. Keep records of any securities or holding that you gave away to document the transactions.

Keep records of improvements made to your home or any other real estate you own. Adding a deck, a family room or a garage increases the cost basis of your home which will come into play when you sell your home.

Absent fraud, the IRS can go back three years (that’s the statute of limitations) and audit your tax return. So at a minimum, you will want to retain all of these records at least three years AFTER your have sold or otherwise disposed of an asset. Keep your cancelled checks, bank statements and receipts to track expenditures and deductions.

What about all of the prospectuses and annual reports investors receive? After you read them, feel free to put those in the recycling bin. Just make certain that any personal information is shredded. Unless you are receiving your prospectuses electronically, then you can just hit the delete button!

Lineweaver Financial Group is having an education program on Electronic Delivery & Record Retention on Tuesday, November 18 at 6:30pm and Thursday, November 20 at 1:00pm. Call us to reserve your seat!

To view the entire Q4 newsletter, click here!