One thing we do is keep the most recent year's pile of papers nearby, as we may need to go digging through them. We have a little storage box for this purpose and that works quite nicely.
What has not been working, however, is the stuff that gets dumped out of the little storage box -- in this case, all of 2006. All our old files go to the basement where the dust and the mice and the damp have their way with them. (We have an old sort of basement: frogs, bats, and lizards are routine down there. No, I am not kidding.)
Recognize it? It's the plastic packaging that new sheets etc. come in. Works for us!