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Smart Money: Data Breaches, and Catching Up On Retirement Savings

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Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions. 

This week’s episode starts with a primer on what to do if your data is breached.

Then we pivot to this week’s money question from Melanie, who sent this message: 

"Hi, Sean. My name's Melanie. I am a millennial and I have not been contributing to my IRA or 401(k) in quite a while. So I read a blog article recently about how much I'm supposed to have saved by now, and of course, I'm not even halfway to that point and I know there's a lot of people out there in my shoes who are doing even worse. So I was wondering if you knew of any tricks or hacks, things to get around that limit so I can start contributing a lot more.

I've heard that there's one, but I don't know the details about it, that if you have a business license like an LLC, you can possibly contribute no limit to a 401(k) or an IRA. Can you tell me a little bit more about that or if you know any of the details around that or maybe that's a myth? I don't know. All right. I'm looking forward to hearing more. Thanks for your help."

Check out this episode on either of these platforms:

Our take on data breaches

When data breaches make national news, as has been the case in early 2023 with Experian, Sequoia and even the password management system LastPass, they remind us to secure our own accounts. Prevention really is the best strategy, and one of the best tools is a credit freeze. When a freeze is in place, new accounts that require a credit check cannot be opened in your name unless you lift the freeze. 

A fraud alert is another defensive measure that prompts lenders to contact you whenever someone tries to open an account with your Social Security number. Other best practices include regularly monitoring your credit reports, creating complex passwords and turning on two-factor authentication. Setting up all of these protections takes time, but it’s time well spent if it safeguards against identity theft that can damage your finances. 

Our take on catching up on retirement savings

Perhaps nothing is more personal in personal finance than the amount you need to save for retirement. However, as a general guideline, many experts recommend saving enough to replace 80% of your pre-retirement income. If you find yourself behind on saving for retirement, there are ways to get back on track.

Many financial advisors recommend that people take advantage of any 401(k) matching that their employer may offer, and max out their IRAs. For 2023, the maximum contribution limit for a 401(k) is $22,500 and $6,500 for an IRA. For those 50 or older, contribution limits increase to allow soon-to-be retirees to cover ground more quickly. Called catch-up contributions, they allow you to save an additional $7,500 in a 401(k) and an additional $1,000 in an IRA.

Delaying when you receive Social Security payments is another way to boost your nest egg. Each year you put off your application after your full retirement age, currently between 66 and 67, can add 8% to your check until age 70, when your benefit maxes out.

Our tips

  1. Remember that you are not a number. Saving for retirement can be stressful, but don’t let the balance of your retirement account define you.
  2. Save where you can: 401(k) plans and IRAs can be easy ways to save. And remember that contribution limits are increasing for 2023.
  3. Be wary of social media advice: Apps like TikTok and Instagram are full of misinformation — personal finance and otherwise. Turn to trusted sources of information (like NerdWallet) for help.

Have a money question? Text or call us at 901-730-6373. Or you can email us at podcast@nerdwallet.com. To hear previous episodes, go to the podcast homepage.

Listen now and subscribe: Apple Podcasts | Google Podcasts | Spotify | Stitcher | RSS Feed | Omny Studio

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