Pay Dirt is Slate’s money advice column. Have a question? Send it to Kristin and Ilyce here. (It’s anonymous!)
Dear Pay Dirt,
I’m usually not much of a worrier, but given how this country is unable and/or unwilling to put guardrails around A.I. development, I believe it’s only a matter of time before a major financial institution loses control of their assets via hackers (including ones sponsored by rogue states). How do I protect my retirement savings? I already have my funds split up between six different institutions. Should I split it up further? Give up higher interest to lean more into government bonds? My granny kept her savings in old coffee cans. Was she onto something? (Kidding, I think!)
—Is It Time to Bury My Savings in the Backyard?
Dear Is It Time to Bury My Savings in the Backyard,
Your grandmother was a visionary, but no—leave the coffee cans in the kitchen.
Let’s separate the real risk from the catastrophic-scenario risk, because they require different thinking. The scenario you’re describing—a state-sponsored A.I. hack so total that multiple major financial institutions simultaneously lose customer assets with no recovery—is not a zero probability, but there isn’t much you can do to guard against that. And if it did happen at that scale, it’s more likely we’d see societal collapse, not retirement account volatility.
It’s also not the risk that’s most likely to hurt you. Here’s what’s actually protecting you right now: SIPC insurance covers up to $500,000 per brokerage account, and the FDIC covers $250,000 per depositor, per bank, per ownership category. More importantly, your assets aren’t held by these institutions—they’re held at them. A brokerage getting hacked doesn’t necessarily mean your Vanguard index funds evaporate. The underlying assets are separately custodied. The way modern banking and investing is set up, you’d have to be hacked individually because someone got your passwords and accessed your individual accounts.
It could happen. A.I. is terrifyingly powerful. But splitting assets across six institutions is already more diversification than most people have, and at some point the complexity cost outweighs the marginal safety benefit. More accounts means more login credentials, more things to track. Past six—or perhaps even at six—you might actually be increasing your personal cybersecurity risk.
What does meaningfully reduce your exposure: strong, unique passwords; a password manager; two-factor authentication on every financial account; and freezing your credit with all three bureaus. Never give passwords or verbal authentication to anyone who calls you pretending to be from your bank, the IRS, or local police—these are almost always scams, and increasingly A.I.-generated ones. Call back on a number you know is legitimate. And separately: Never provide personal information or passwords over email, ever. These steps protect against the vast majority of hacks that actually happen to real people every day.
When it comes to your investments, your allocation should reflect your financial timeline and risk tolerance, not your anxiety about geopolitics. If you’re in your 30s, investing mostly or exclusively in bonds will likely limit the money you’ll have in retirement—so make that decision based on your actual horizon, not doomsday scenarios. If a more conservative allocation helps you sleep, that’s valid. Just make sure you’re choosing it, not fear.
Your grandmother kept her savings in coffee cans because she didn’t trust banks. She was likely born during the Great Depression or its aftermath, when there were serious runs on banks and families were driven into ruin. The good news is you have better options. Use them.
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Dear Pay Dirt,
After growing up with a single parent, mostly hopping from apartment to apartment as a kid, I (33) was incredibly lucky in adulthood to become a homeowner in 2018. Granted, the house is fairly old and very small, but it works for my partner and me. We are not married but plan to soon, and the house/mortgage is only in my name. I also make the vast majority of our money (she has health issues that make it hard to hold down a full-time job), so I handle most of the finances at this time.
We are talking about starting a family, and (among everything else!), I am kinda freaking out about having space for a kid. Like I said, the house is small, around 780 square feet of livable space. One of the ways we could add a lot more space is to do some work on the semi-finished basement and get the spacious attic finished and made into rooms. Before we could get to that point, we also need some electrical repairs, among other things. All of that is to say, we would need a lot of money to do this all. And I just … don’t understand how people do that. It’s SO MUCH money! Aside from my 401(k), I have about $12,000 in savings and another $4,000 in an investment account. We just paid off my partner’s car (which is in both of our names), so I have no other debts outside of the mortgage.
But it took a long time to even get the savings that I have, and I fear it wouldn’t go very far if I lost my job for some reason, so I’m hesitant to pull from there. Am I missing some financial secret that allows people to do major work on their home like this?
—How Do People Do This?
Dear How Do People Do This,
There’s no secret, and you’re not missing anything. Most people do major home renovations one of two ways: They borrow against their home, and/or they do it in stages over years. Usually both.
There are a couple of financing options that might help. One is the FHA 203(k) loan, which allows you to borrow up to $75,000 to improve your home. The loan amount is based on the projected value of your home after improvements are complete, so the work needs to pencil out on paper. The other possibility is a home equity line of credit, or HELOC. Since you bought in 2018, you’ve likely built up meaningful equity—both from paying down the mortgage and from appreciation over the past several years. A HELOC lets you borrow against that equity at a much lower interest rate than a personal loan or credit card, and you only draw what you need. It’s not free money, but it’s the most sensible way most homeowners fund exactly this kind of project.
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Before you do anything else, get a rough sense of your home’s current value and your remaining mortgage balance. That gap is your equity, and a lender will typically let you borrow against 80–85 percent of it. Then get estimates on the work—electrical first, since that’s a safety issue, then the basement and attic. Doing it in phases also means you’re not taking on everything at once.
One important note: While you and your partner plan to marry, you’ve built this house with your own funds and you’re the primary, if not sole, earner. Think carefully about whether you should protect that investment with a prenup. Depending on the state where you live, marrying without one could potentially give her rights to half the equity if you divorce, or—depending on how debts and assets are structured—give her creditors access to it should significant medical or other debts arise during your marriage. You’ve built something real here. Consult with a real estate or estate attorney before you access any financing.
Your $12,000 emergency fund instinct is correct—don’t touch it. Kudos to you for building that bedrock, a lesson painfully learned from an unstable childhood. Keep it exactly where it is.
Finally, plenty of families have been raised in 780 square feet. Don’t build more than feels comfortable financially just because you think you “should.”
—Ilyce
More Money Advice From Slate
My husband and I got married at the turn of the century and recently found out that we are an anomaly among our peer group because we have merged finances. We have our own retirement accounts, but all of our income otherwise goes into shared accounts. Our friends—some who married earlier than we did, some at the same time, some later—have one joint account for agreed-upon shared expenses, and then their own individual accounts for everything else. When our first couples-friends told us this, we thought they were out of the ordinary—all of our expenses are shared! We don’t get it. We started asking our other friends, and it turns out we are the outliers! We have opened a can of worms: Our friends are universally appalled that we share everything and have “nothing” of our “own.”
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