After I retired last year, I resolved to complete household projects I didn’t have time to tackle when I was working full-time. I’m not alone in this regard: One of my friends spent his first week of retirement cleaning out his garage. I don’t have a garage, but I have a file cabinet that contains almost as many documents as the National Archives, so I spent a recent snowy afternoon going through old tax returns and other financial ephemera.
I used to believe it was a good idea to hold on to a copy of your tax return forever, because it’s a useful snapshot of your financial situation at different stages of your life. But once you hit retirement age, keeping tax returns from your twenties and thirties can become unwieldy, and it’s unlikely you — or the IRS — will need to see 30-year-old mortgage interest documents or 1099 forms.
The IRS has three years from the date you file your return to audit it, so the general rule of thumb is to keep supporting documents for at least that long. You may need to hold on to some types of documents for longer than that — records of home improvements, for example, as well as brokerage statements that show when you purchased a stock or fund (you can find a good rundown of these rules here.
Another important caveat if you (like me) have self-employment income: The IRS has six years to audit your return if you underreported your income by 25% or more. While that’s probably not a concern while you’re working and having taxes withheld from your paycheck, self-employed people who receive 1099s from multiple sources may overlook some of that income. With that in mind, I plan to create a large file (either on paper or digitally) for my 1099s and business expenses.
Managing Medicare forms.
In addition to general housekeeping, I had another reason to thin out my tax files: Making room for other paperwork. Now that I’m retired and eligible for Medicare, I receive a ton of mail from the Centers for Medicare & Medicaid Services, the Social Security Administration, my medigap supplemental plan and my health care providers.
Since I’m new to Medicare and encountered some problems when I first enrolled, I’ve saved most of these documents, particularly my Medicare Summary Notices (MSNs). These notices list all of your Medicare Part A and Part B charges billed during the past four months and the maximum amount that you may be billed.
The statements also show which claims have been sent to your medigap provider. If you have a Medicare Advantage plan, you’ll receive an Explanation of Benefits that contains similar information. You will also receive an EOB for your Medicare Part D prescription-drug plan.
You can use these notices to monitor your out-of-pocket costs and check for errors — for example, a denial of a claim because a provider gave the wrong information to Medicare. The MSNs also provide a form you can use to appeal a claim that was denied, along with the deadline for filing an appeal. Financial experts recommend keeping your MSNs for at least a year — longer if you expect to deduct medical expenses on your taxes.
I pay my monthly premiums with an online account at Medicare.gov, and I use the account to check details of my claims and determine whether I’ve met my Part B deductible, too. You can also have your MSNs or EOBs delivered electronically.
I may eventually sign up for that, but for now, I like the idea of having a paper document on hand in the event I need to contact Medicare or a provider. I also need to set up a better system for storing and accessing digitized documents.
Sounds like a good resolution for 2027.
Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.
