Which IRA records and forms should be rtetained and for how long?

Submitted by fairira on Fri, 2014-02-28 00:29

An 85-year old man owns 2 Vanguard IRA’s–a conversion RIRA and also a TIRA which was derived from contributions and from rollovers in 2009 of a Vanguard profit-sharing plan and money purchase pension plan.

He would like to retain only those records and forms which he or his IRA beneficiaries may need. Since 1998 Vanguard has maintained account records for its statements, tax forms, transaction history, etc.

What should the IRA owner himself retain and for how long and, after the IRA owner’s demise, what should his beneficiaries retain and for how long ?

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Permalink Submitted by Alan - IRA critic on Sat, 2014-03-01 00:53

There are many variables that could affect the answer. Even the individual investments in the IRA as indicated on past statements, while immaterial to IRA taxation and distribution requirements, there are frequent class action lawsuits that involve filing claim forms for the investments held up to 15 years prior. If the IRA owner does not care about the benefits of these potential settlements, records can be purged that are more than a couple years old. For a TIRA account, if there is basis, the most recent Form 8606 should be retained either as a part of a retained tax return or in the IRA file. Beneficiaries inherit any unrecoved basis in the IRA. For a Roth IRA, once the Roth is qualified (5 years adn age 59.5, prior Roth records can be tossed. If his first Roth was in 2009 the Roth is now qualified and fully tax free. Another variable is the availability of records from the IRA custodian, so if there is only one IRA custodian involved and provides access to records, the IRA owner can be more aggressive in purging files, particularly IRA statements.
RMD compliance is another issue. As above, if the custodian provides access to records, that would include year end balances and 1099R forms showing distributions. If IRA owner retains tax records (returns and 1099R info) for 7 years, that would generally be long enough as the tax records mostly duplicate IRA records.
For beneficiaries of a Roth IRA, all they need to know is the first year owner contributed, and once the 5 years has passed, they can toss any Roth records. For a TIRA without basis per Form 8606, they only need to keep records of the owner for perhaps 5 years, and then only those that pertain to the year of death RMD because the beneficiaries are responsible for any shortfall there.
It is usually the statements that take up all the room, so purging the statements aggressively can reduce most of the volume of records that should be retained. Beneficiaries should attempt to organize the records right after they inherit because that job would be more difficult as time passes and the estate is terminated.