Paper Trails

Posted July 10, 2008 by Deborah P. Carter

Remember when bill paying meant writing a check and dropping an envelope into a blue metal box on the corner? In the not-so-distant past, hard-copy proof of that payment would come back through the mail in the form of a canceled check to tuck away in a file cabinet in case of a later dispute. Since 2003, electronic images of checks have been legal substitutes for the real thing. But, what about all of our other financial information that lives in cyberspace? “I think people have a false sense of security,” says Kevin Mahn, managing director and chief investment officer of Hennion & Walsh, a securities firm in Parsippany. “They are relying on the idea that they’ll be able to access information online for seven years—which the IRS requires in terms of an audit.”

Online bill paying, it turns out, is convenient but not necessarily reliable for maintaining records. “If you’ve sold stock online and need this information again, can you get it?” Mahn says this is a question you need to ask of every vendor with whom you have electronic financial transactions. “Find out how long they keep their files. And keep paper copies so you have your own records,” he says. “At least retain paper versions of your quarterly statements.” This does not mean you have to return to the cluttered files of yesterday; keep only what you need for as long as you need. The American Institute of Certified Public Accountants recommends keeping retirement plan information, insurance policies, and home records indefinitely. Banking records and canceled checks need only be kept one year, and investment reports for three years.

For more stories about: finance, Money