Can anyone give me some guidance as to how long old software updates and patches need to be retained? Especially if a newer version of the software is being used. Thanks!

Assuming you may have to reinstall it on a reformatted machine, I'd say until you have a CD with a cumulative set of patches. Many won't let you install patch B until patch A is installed.

If the patch is useless because you upgraded, Office for example or IE, you wouldn't need it at all. For my home PC I don't save any of these. I'll download them if needed. But I don't have the volume of rotating machines as a business would.