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MY WIFE AND I TAKE some over-the-top precautions to protect our financial accounts. Why? After 40 years of working, our life’s savings boil down to digits stored on computers. No one anymore holds stock and bond certificates, stuffs money in mattresses or buries gold in the backyard. The integrity of those digits is all important.
Here are our 11 strategies—which go way beyond the normal account and password protection recommendations:
John Yeigh is an engineer with an MBA in finance. He retired in 2017 after 40 years in the oil industry, where he helped negotiate financial details for multi-billion-dollar international projects. His previous articles include Hers, His and Ours, Unloaded and Getting Schooled.
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I follow many of the same strategies to protect financial accounts.
Like you, I don’t trust the “cloud” to store my credentials.
Consequently, I use a free open-source password manager (KeePass)
to store credentials locally on my home computer.
This makes it easy to manage many unique, complex passwords.
I don’t see the value in maintaining relationships with eight different institutions.
In my opinion, this increases complexity without providing additional security benefits when compared to using two or three major institutions instead.
The unique passwords etc. are a royal pain the bane of all this-but necessary for now. Have you added a VPN for another layer of security? Also (borrowed from a book I read recently) recently created a separate email account exclusively for financial accounts. Segregated from personal accounts-and spam! Makes it easier to monitor without wading through junk. Also makes it easier upon death to show offspring where everything is. Here is the ONE account to monitor. Great tips.
We have considered an exclusive financial email account, but we haven’t quite gone there yet. We do have a family email account (all online transactions and plenty of junk emails/phishing) which is separate from personal email accounts (not much junk). Fortunately, Apple, Google and Microsoft all continue to improve their junk mail sorting. The importance of solid email account protection is that password resets often are allowed via email.
We do about 70% of this, much of it by accident, as work has 2-4 separate accounts alone, plus another 6-8+ various investment/retirement accounts (and that’s after consolidation!). A digital kind of attack would undoubtedly affect everyone significantly, including us, but I view it as a consequence of the digital age. I’d keep more on paper but my wife isn’t game (too much clutter). Security is a prevalent issue, I agree.
The 13 accounts already include some consolidation from life’s accumulations (jobs, inheritance, kids), and we are considering a bit more. I think 3-4 institutions might be our eventual minimum unlike a couple friends who have consolidated to one all-encompassing instituition, but even those consolidations include separate joint, spousal and IRA accounts.
While it is important to have unique passwords for each account, you really don’t need to change your password unless there is a reason to believe that there has been a security breach. Changing passwords frequently may be counterproductive if it makes you more likely to rely on simple and easy to remember passwords.
https://blog.lastpass.com/2018/08/often-change-password.html/
A lot of places FORCE you to change passwords every quarter or every six months. I hate it. What’s funny is a lot of these websites are things I access for work, and I couldn’t care less if someone hacked into my login because I have no trading authority or there’s nothing confidential there for anyone to see.
In the event of a massive hack, I’d expect SIPC coverage to kick in: https://www.sipc.org/for-investors/investors-with-multiple-accounts
No security solution offers 100% confidence of perfect protection, but using 2FA with hardware keys like YubiKey 5 is as close as individual investors can come to that today.
Yes, I would highly recommend to read article by David on this topic on humble dollar- https://humbledollar.com/2019/02/playing-defense/
Very helpful thoughts, thanks John. It is scary thinking about conditions that could produce another Lehman Brothers type bankruptcy or Bear Stearns and Merrill Lynch near misses during the housing crash. Thus it makes sense to segregate investments across accounts and larger brokerages as another form of diversification and as a way to maximize SIPC coverages.
One thing that may not be appreciated by many is the Oct 2016 SEC money market rule to “protect” retail investors. This allows brokerages to charge up to 2% for withdrawals or even refuse withdrawals altogether for up to 10 business days (per 90 day period) during market runs. As an example; Vanguard’s Prime Money Market fund I’ve used for decades comes under this new rule, while Vanguard’s government money market funds do not.
Maybe some cash buried in your back yard in a PVC pipe isn’t so crazy after all. 🙂
Does having some nickels,dimes and quarters in our penny jar count as having cash? If so, we’re good……
Good article. I think about this a lot too and the fear of what could happen. But my biggest worry about setting up anything too complex is the aspect of aging.
Even without dementia issues, cognition naturally slows in most people. Especially for those who are child-free, too much financial/investment account complexity can create different, but equally serious problems, vs paring down to a simpler, more manageable setup they can handle in the latter phases of retirement.
For some, maybe the answer is to maintain a few bank accounts w/smaller amounts in each, since those are much simpler/straightfwd, but consolidating equity/bonds in one place or maybe converting some of the latter to fixed annuities.
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