Flash forward to year 2040 and you're about to retire. All you need to do is notify the right people, and money from your retirement savings accounts will start to roll in. Now, just where is the paperwork that tells you how to collect from your employer-sponsored retirement plans? And, with whom did you invest Roth IRAs with back in 2010? And, was there another account that you opened when you lived in another state? Oh my, where are those financial papers when you need them!

Now is the time to set-up a financial filing system so that you can find the papers you need when you want them. Beyond the usual files of "Bills to Be Paid" and "Things to Do," set up a place where you can keep financial information for the long-term. Many people find that a file cabinet or box with file folders works well. Once you have a place to put papers, filing them away is a relatively easy process.

One of the tricks of organizing financial papers is to keep only the papers you truly need and to throw away others as soon as possible. Save things that 1) prove what was done (for example, job contracts), 2) remind you of what you have (receipts for large purchases), and 3) protect your assets (mortgage paperwork and statements from mutual funds, banks, etc.) Throw out those records that have expired, have been replaced, and are no longer important to you. For example, if an annual statement from a mutual fund contains all the information that was originally sent to you quarterly, you can discard the quarterly statements once you've received the end-of-the-year annual statement.

Be careful when disposing of financial records. A credit card number or bank account number could be retrieved by a thief and used to make charges against your account. Carefully tear up or shred any financial documents that contain account numbers, Social Security numbers, or other sensitive information before tossing the

Some financial paperwork is especially important to save. You should keep a copy of income tax returns and supporting documentation (receipts and worksheets) for several years. The Internal Revenue Service has three years to audit federal income tax returns; however, in unusual cases they can look at records six years old. You may need even older tax records if you own a home, have a non-deductible IRA contribution, or you have business or rental property that you are depreciating over a number of years. For more information about this, check the IRS Publication 552, Recordkeeping for Individuals at http://www.irs.gov/publications/p552/index.html.

It's important to keep investment and brokerage statements both as proof of ownership and for tax purposes. Be sure to keep all statements that show purchases or sales of investments such as stocks, bonds, and mutual funds. If you reinvest dividends (use the dividends to automatically purchase new shares of the investment), you will also need records showing the dollar amount of those dividends. For taxable accounts, keep all these records for at least three years (and preferable seven) after you sell the investment.

Taking the time to manage your financial papers today means that you'll be better able to retire more easily in the future. For more information about which financial papers to keep, visit University of Illinois Extension's website, "Dealing with Clutter" at http://www.urbanext.uiuc.edu/clutter/. For more information about retirement planning, visit the Plan Well, Retire Well: Your how-to guide website at www.RetireWell.uiuc.edu.

Source: Kathy Sweedler, Extension Assistant, Consumer and Family Economics

Department of Agricultural and Consumer Economics

University of Illinois