How Long Should You Keep Financial Records?

People often want to know how long they should keep bank statements and other financial records.   There are different rules depending on the kind and purpose of the record, but five years is probably a good rule of thumb, says Chris Bray of Rheinhardt & Bray, PC.

For income tax purposes, three years is generally enough for most people. Tax records would include 1099 and “W” forms, and any other statements showing income, deductions or capital gain or loss transactions.

Three years is not long enough when it comes to Medicaid.  Medicaid requires five years of records to accompany an application for nursing home care.  Bray also points out that it is not just tax records that have to be filed.  Medicaid wants five years of all financial records, including things like monthly bank account, quarterly brokerage and even annual life insurance statements.

Information can be stored electronically for convenience, but of course security should be maintained. It is not a good idea just to rely on the bank or other financial institution to be able to provide records. Medicaid has time limits on providing information, and it can be difficult to trace and find statements when a bank has merged, for example.  The bottom line is while it may be a burden, it is smart to keep every statement and record for every financial account you have for five years.

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