Purge your financial paperwork

Employment records. Typically, you can dispose of your pay stubs after comparing them to your annual W-2 form. If your year-end pay stub shows information that's not on your W-2, such as tax-deductible union dues -- consider keeping that last stub for seven years.

Home. Most of the paperwork created when you bought your home -- sales contracts, deeds, mortgage paperwork, appraisals, surveys -- is worth hanging on to as long as you own your house, if not indefinitely. For tax purposes, keep documentation of the costs of buying and selling a property, including real-estate commissions and fix-up expenses. Home improvement records are another type of paperwork you'll want to keep, since they can help reduce the potential tax bill when you sell. Finally, home repair documentation can be handy to have if the repair doesn't hold up and needs to be redone.

Insurance. Ditch your old homeowners, renters, auto and health policies when there's no longer a chance you'll file a claim and they've lapsed or been replaced or when you've gotten rid of the asset. You can shred claims information after a year, unless there's a tax deduction involved (such as for large medical expenses). If your life insurance policy has lapsed or expired, check to make sure it has no cash value before discarding. If you get an insurance payout, keep those records at least seven years and perhaps indefinitely; the IRS may want to know where all that money came from.

Investments. If you've got a taxable account, you'll want to keep the statements that help you establish your "basis"-- how much you paid -- for as long as you own the investments, plus seven years. This list includes statements that show purchases, reinvested dividends and stock splits. Other paperwork can generally be discarded after you check it against your monthly statements and your 1099 tax forms. The rules for retirement and other nontaxable accounts (see below) are somewhat different.

Retirement accounts. Your retirement accounts aren't eligible for capital-gains treatment, so you don't need to track what you paid for your investments or how much you got when you sold. Typically, the only thing you need to track is your nondeductible contributions, which you should have been reporting on your annual tax returns using Form 8606. Keep those forms indefinitely, as well as the Form 5498s, which summarize your account activity for the year and are sent to you annually by your IRA custodian.

Keeping your year-end statements for your IRAs, 401(k)s and other retirement accounts can help you track your account over time, but probably won't be necessary for tax purposes. You also might want to hang on to documents that detail any transfers between account custodians, such as if you change brokerage firms or roll your 401(k) balance to another job or an IRA.

Also, if you contributed to a 403(b) account before 1987, keep your old account statements indefinitely to prove the contributions. This money doesn't have to be withdrawn until age 75, while other retirement money generally has to come out earlier.

Taxes. You typically can dump most of the supporting documentation after seven years, but consider hanging on to the tax returns themselves indefinitely.

Wills and estate plans. With most documents, disposing of outdated versions is optional -- something you can do after a given amount of time. With estate documents, such disposal is often a necessity if you want to avoid future confusion. Shred old wills, living trusts, health-care directives and powers of attorney (originals and any copies) once they've been replaced by entirely new versions. But keep indefinitely any estate or trust tax return that's been filed.

Liz Pulliam Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "Your Credit Score: Your Money & What's at Stake." Weston's award-winning columns appear every Monday and Thursday, exclusively on MSN Money. She also answers reader questions on the Your Money message board.

Updated June 1, 2009

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