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INSIDE
FINANCE:
All
Those Financial Records Got You Down? Here's a New Year's Resolution
to Keep!
By Robert M. Jaffe, MBA, AAMS
January 5, 2005
Happy New Year Clifton!
This is our first "Inside Finance" column,
which we hope you will find helpful in dealing with a multitude
of personal financial matters. In the future we will address various
areas of finance that you may deal with frequently, from long-term
goals to immediate concerns. So, as the new year begins, let's think
about stock; taking stock, that is.
The paperless office may be coming, but in the
meantime most of us remain awash in financial records. Worst, perhaps,
are the investment account statements. They arrive monthly or quarterly
for every kind of account: taxable, traditional IRA (deductible
and non-deductible), Roth IRA, 401(k), custodial. Do you really
need to keep everything in perpetuity? As the new year begins it's
time to take stock.
Not quite. For the most part, financial record-keeping
is all about taxes, and some records are more important than others
in that regard. In the case of 401(k)'s and deductible IRAs, any
transactions you make inside the account don't matter much, because
when you pull money out during retirement you'll just have to pay
income tax on everything, including your contributions and all investment
gains. You should keep annual summaries from your IRA custodian
(Form 5498) or the administrator of your 401(k), and tax returns
documenting IRA contributions. And if you change jobs or choose
a new custodian, hold on to records showing what happened when.
But all those routine account statements can go.
For non-deductible IRAs, you'll still owe income
tax on withdrawals, but only on your gains. Therefore it's important
to keep track of your contributions, so they won't be taxed twice.
You should file an IRS Form 8606 each year you put money into the
account, and save a copy. For Roth IRAs, keep all 5498's as a record
of contributions. But here, too, you don't have to keep every statement.
For regular taxable accounts and custodial UTMAs
or UGMAs, however, you're going to need a lot of file folders. You
should keep a record of every stock, bond, or mutual fund transaction-including
how much you bought or sold and at what price-and save statements
showing any dividends, interest, and other distributions you receive.
Stock split dates and particulars are essential, too. All of that
information will help at tax time, now and for years to come, when
you need to compute capital gains and losses. So make a resolution
right now to stay on top of your financial records. And however
annoying it may be to have to hold on to these records, trying to
reconstruct events years after the fact would be a lot worse.
Other
Finance Archive Articles
INSIDE FINANCE
will appear regularly, addressing financial matters of interest
to our readers. Any questions? Email bob@cfsias.com
Registered Representative,
Securities offered through Cambridge Investment Research, Inc.,
a Broker/Dealer, Member NASD/SIPC. Cambridge and CFS are not affiliated.
The preceding article
is for informational purposes only and should not be used as the
primary basis for an investment decision. Indices mentioned are
unmanaged and cannot be invested into directly. Past performance
does not guarantee future results. All examples given are hypothetical
and do not reflect actual investments. The views expressed in this
article are those of the author and are not necessarily those of
Cambridge. Bob Jaffe is Managing Director of CFS Investment Advisory
Services, LLC in Totowa and has been a Clifton resident since 1984.
Active in community affairs, Bob is Past Board Chairman of the North
Jersey Regional Chamber of Commerce and a member of its foundation
board. He serves as a commissioner on the Clifton Rent Leveling
Board and the Committee for Individuals with Disabilities. He is
Vice President of the Clifton Rotary Club. Representatives of Cambridge
do not offer tax or legal advice. Consult a professional for your
personal situation.
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