September 17, 2013

My Retirement was Hacked!

What do you do if the NYSE gets hacked?  Nasdaq?  Furthermore, what happens if your retirement
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sponsor (i.e., Vanguard, Principal, Schwab, etc) gets hacked?  Would they refund you your money?  Unlike most checking/savings accounts, your retirement fund is not supported or backed by any Federal bank insuring or guaranteeing that your account will be restored to a certain level.

Bank accounts have certain safe guards on them that limit transaction liabilities to $500, and even credit cards have a $50 liability, if the fraudulent activity is reported within a certain time frame.  So, for instance, if you realize a $3,000 fraudulent activity on your savings account - the bank will replace your $3,000 minus your $500 liability.  Some banks have full recap with no liability due from you.

However, many retirement accounts have little safeguards in place and "no federal consumer regulations specifically protecting consumers in the event of brokerage account hacking" according to an article by MSNBC.

Some accounts have inconsistencies in their statements - for instance, in one paragraph this sponsor states "We will reimburse your account for any losses due to unauthorized activity".   But in the small print you will notice a "loophole" statement stating: “[the customer protection guarantee] also does not cover unauthorized activities resulting from a breach of security in an employer or plan sponsor’s systems.

I don't really have an answer on how to protect your employer or plan sponsor's systems in case of a breach - but I would at least check my plan sponsor's "customer protection guarantee" to be sure of the procedures to restore balance should your account become jeopardized.  And, if my plan sponsor was not completely sufficient for me - I'd move to another sponsor that I was more comfortable with.  There's already enough volatility and uncertainty in the market - the last thing I'd want to question is the safety of my money from potential hacks.

So here's my list of what we can do to cover the basics:

  • Make sure your retirement plan sponsor is up to date with security/privacy safeguards.
  • Be sure that the computer you use to access your funds is secure as well.  
  • Check your balance at least once a year.
  • Change your passwords regularly - and have a strong password not used anywhere else!  
  • Store your passwords on a piece of actual paper - not in a document stored on your computer.
  • Keep the latest statement of your account filed in a secure drawer.

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