Given the tax-deferred nature of 401(k)s, it’s possible the contributions you make to a 401(k) and its balance could be subject to review by the IRS. Although highly unlikely, it’s important to be prepared for such cases. To ensure you’re able to navigate any IRS audits or to simply keep track of your 401(k)’s performance, it’s essential to hold onto copies of your 401(k) statements. But how long do you need to keep your 401(k) statements?
How long you keep your 401(k) statements is up to you. For tax purposes, you’ll want to hang onto your 401(k) statements for at least seven years. However, it’s a good idea to keep your 401(k) statements for as long as you have money in the account. Once you’ve withdrawn all of the funds out of a 401(k) or have closed the account and rolled over the funds to another retirement account, you’ll be fine to discard your old 401(k) statements.
There’s more to saving your 401(k) statements than just filing away the documents you receive in the mail. Your 401(k) plan will send you different statements, and knowing the best place to keep them will ensure you don’t lose them or don’t end up in the wrong hands.
Why should you save your 401(k) statements?
When it comes to your financial life, it’s essential to keep detailed records. This helps you stay on track to meet your financial goals, prevent anything happening to your money that shouldn’t, and be able to answer any questions should your accounts be subject to an audit.
In most cases, seven years is the limit the IRS will go back and review your tax filings. However, there are some instances where tax records older than seven years have been questioned. For this reason, it’s important to save your 401(k) statements so you can prove your case if your retirement savings ever come into question.
Additionally, having a long track record of your 401(k) can help you identify if anything doesn’t look right. If you rolled over an old 401(k) to an IRA or a new 401(k), you can look back to make sure the amounts match your records. Or, when it comes time to retire, you can make sure your available balance is in line with previous statements.
Your retirement savings are important. By the time you retire, your retirement accounts should be the most significant asset that makes up your net worth. It’s essential you keep track of it yourself and not rely on your 401(k) plan’s custodian to keep records for you. This could lead to you losing money or being limited to what you can do with it when you’re finally ready to retire.
Where should you save your 401(k) statements?
Where you save your old 401(k) statements is just as important as why. You shouldn’t simply shove them in the back of your desk drawer and never look at them again. Ideally, you’ll want to save a few copies of them in case something happens to one.
If you have the means to securely save physical copies of your 401(k) statements, make sure they are kept in a fireproof safe or filing cabinet. Also, you’ll want to make sure in the case your home is ever broken into; thieves can’t easily find your documents. Your 401(k) statements in the wrong hands could lead to someone having access to your retirement funds that shouldn’t.
In addition to physical copies, it’s a smart idea to keep digital copies of your 401(k) statements. Be sure to save a couple of copies of each statement in case a hard drive crashes, or you lose access to your cloud storage. Keeping digital copies of your 401(k) statements is ideal because you don’t have to worry about managing stacks of physical paperwork, and you can organize your financial documents more efficiently.
How long should you keep your 401(k) statements?
The best thing about saving your 401(k) statements digitally is you can keep copies of them forever. Not needing to make space for decades of financial records, you can hang onto your 401(k) statement indefinitely.
Depending on your 401(k) plan, you should receive quarterly or monthly statements. Additionally, your 401(k) plan will provide you with annual statements. Your annual statements should be the documents you keep long-term. Save your quarterly statements until you receive your annual statements, then you can discard the quarterly or monthly statements.
As long as you haven’t taken any early retirement withdrawals from your 401(k), you won’t have any tax documents to keep track of.
How to properly dispose of your 401(k) statements.
Keeping your financial information secure is essential. Not only will it prevent your identity from potentially being stolen, but it will also prevent thieves from gaining access to your 401(k) and its funds.
If you receive physical copies of your 401(k) statements and don’t wish to keep them, shredding them is the best method for disposing of them. Investing in a shredding machine for your home is an excellent way of getting rid of sensitive documents like your 401(k) statements. However, remember to scan digital copies of your 401(k) statements before destroying them.
As far as digital copies, it’s important to remember to delete any copies of your 401(k) statements before getting rid of any computers or external hard drives.
Bottom line…
Whatever method you use to keep records of your 401(k) statements is up to you. The important thing to remember is saving your 401(k) statements is essential to keeping track of your retirement savings and making sure nothing happens to it that shouldn’t.
Whatever organization method works best for you will work as long as it’s secure and easily managed. Hopefully, you’ll never need to revert back to old 401(k) statements to get yourself out of a bind. But by keeping detailed, historical records for your 401(k) statements, you can help protect your retirement savings.
