Password manager security: Are password managers really safe?

Strong password security calls for a unique password for each account we use. But with our online lives growing increasingly complex, spreading across potentially hundreds of accounts, it’s becoming nearly impossible for users to remember and keep track of all their logins without help.

That’s where password managers come in. These tools store and manage login credentials, allowing users to generate and retrieve complex passwords across accounts and devices.

Password managers have become a vital tool for reducing risk and improving security hygiene – but are they really that safe? We’ll aim to answer this question, exploring password manager security, the risks you should be aware of, and the best practices for using them safely.

Why use a password manager in the first place?

Before diving into the potential risks presented by password managers, it’s worth revisiting why password managers have become so popular in the first place.

Here’s a quick overview of some of the main benefits of using a password manager:

• Strong, unique passwords: A password manager lets users generate complex passwords that are far more secure than reused or weak ones.
• Reduced reliance on memory: There’s no need for the user to remember dozens (or hundreds) of credentials, or write them down somewhere they could easily be stolen.
• Improved user experience: Password managers usually come with an autofill functionality that can save a lot of time and frustration, especially when switching between devices.

These benefits are backed by user sentiment. A 2024 survey found the top reasons people gave for using a password manager were:

• They couldn’t remember all their passwords (78%)
• They wanted to use passwords across multiple devices (67%)
• They wanted to generate stronger, more complex passwords (55%)

The same survey also found that users with password managers were less likely to experience identity theft or credential theft compared to those without, which proves just how powerful a secure password manager can be.

Are password managers safe?

While no system is entirely risk-free, the short answer is yes, password managers are safe when implemented and used correctly. NIST and NCSC guidelines encourage the use of password managers as part of a modern, layered security strategy.

Encryption and zero-knowledge architecture

Most reputable password managers use end-to-end encryption, meaning your data is encrypted on your device before it ever reaches the vendor’s servers. This means that even if a database is compromised, the attacker can’t decrypt your stored passwords without knowing your master password.

Many solutions also follow zero-knowledge protocols, which means the vendor has no access to your encryption key or stored data. This significantly limits the impact of a potential breach.

Local vs cloud storage

Password managers typically store your encrypted vault either locally (on your device) or in the cloud. Each approach comes with its own set of advantages and trade-offs, depending on your needs.

• Cloud storage offers convenience and sync across devices; however, it does inherently increase the potential attack surface (e.g. through phishing or Man-in-the-Middle attacks).
• Local storage can reduce exposure, especially for highly sensitive environments, but lacks mobility. If the device is lost or damaged and no secure backup exists, you could permanently lose access to your vault.

Built-in security features

Leading password managers typically include additional security features, such as:

• Multi-factor authentication (MFA) for an added layer of protection.
• Biometric access (like fingerprint or facial recognition).
• Security audits and breach monitoring to alert users if any of their credentials have been compromised.

Potential password manager security risks

Although password managers are considered safe, no tool is completely invulnerable. Here are some of the key risks to be aware of when using password managers:

• Master password compromise: This is one of the biggest potential password manager security risks. If a user’s master password is weak, reused, or compromised, an attacker could easily gain full access to their vault. This is why using a strong, unique master password is non-negotiable.
• Phishing or social engineering: Even with encryption in place, attackers may trick users into revealing their credentials or bypass MFA via social engineering.
• Malware and keylogging: If a user’s device is compromised, malware can capture keystrokes or extract data from memory, even from a locked password manager.
• Vendor breaches: While uncommon, breaches do happen. For example, a 2022 breach of LastPass involved stolen encrypted vaults, leaving sensitive customer data compromised.
• Poor vendor security: Not all password managers follow best-in-class security practices. Vendors that don’t regularly undergo third-party audits, publish transparent security models, or patch vulnerabilities quickly may introduce unnecessary risk.

Password manager security best practices

For both individuals looking to use a password manager for personal login information and businesses adopting enterprise password managers, there are some essential steps to take for maximum security.

1. Use a strong, unique master password

Your master password is the key to your entire vault. If it’s weak or reused, it could undermine even the most secure password manager.

Best practice is to use a long passphrase made up of random or unrelated words (e.g. CorrectLavenderStaple). A secure password should never include guessable words like names or birthdays, common phrases, or passwords that have already been used elsewhere.

Organizations should implement robust password policies that enforce complexity requirements and prevent the use of weak or compromised credentials.

2. Enable multi-factor authentication (MFA)

MFA adds a crucial second layer of security, requiring you to verify your identity using something you have (e.g. a phone or hardware token) in addition to something you know (your master password).

Use third-party authenticator apps or hardware keys for stronger protection than SMS-based codes, which can be intercepted or spoofed. Enterprise password managers often support enforced MFA policies, so make sure these are turned on and monitored.

3. Always keep software updated

Vulnerabilities in software are constantly being discovered and patched. Keeping your password manager (and the devices it runs on) fully updated ensures you have the latest security fixes.

IT teams should regularly audit and manage software versions across the organization. This includes browser extensions, desktop apps, mobile apps, and operating systems.

4. Avoid public or shared devices

Users should only access their password vault from trusted, secure devices. Public or shared computers, like those in hotels or cafes, may be infected with keyloggers, malware, or other surveillance tools that can compromise the master password.

5. Choose reputable password manager providers

Not all password managers are created equal. Choose providers that have a strong security track record, transparent policies, and features that align with modern security standards.

Look for vendors that:

• Conduct and publish independent security audits
• Release regular transparency or security reports
• Offer zero-knowledge encryption models
• Have clear and responsive security incident response procedures

Enterprise password manager security considerations

Password managers can be highly effective for enterprise use, but they come with added complexity.

User lifecycle management

Organizations must ensure proper onboarding and offboarding procedures. This includes provisioning secure access and revoking it immediately when employees leave.

Policy enforcement and monitoring

Admins need visibility into how password managers are being used and whether users are following corporate security policies.

Active Directory integration

For organizations using Microsoft environments, password managers that integrate with Active Directory can make user and credential management much more efficient. IT teams can provision and deprovision access based on user roles, enforce group-based policies, and allow use of the Active Directory login as the master password for vault access.

However, this integration also introduces security considerations. If your Active Directory environment is compromised, attackers may gain broader access, including potential entry points into your password manager. To reduce this risk, it’s important to enforce strong password policies for your Active Directory, as well as MFA, and regularly audit for suspicious activity or breached passwords.

Should you trust password managers?

Like any tool, password managers are only as secure as the way they’re used. But when configured properly and paired with strong user habits, they can significantly reduce the likelihood of attacks like credential theft and identity compromise.

The reality is: remembering dozens of strong, unique passwords isn’t realistic for most people. Password managers fill this gap effectively and are backed by industry standards and modern encryption practices.

Secure your organization’s password management

As we discussed above, a password manager is only as secure as its master password. For companies using an enterprise password manager with AD integration, using the AD password as the master password can be an effective method – but only if your AD is protected by robust security measures.

Specops Password Policy with Breached Password Protection simplifies this process, allowing you to easily enforce compliance requirements and block the use of over 4 billion compromised credentials.

Discover how Specops Password Policy can strengthen password manager security. Reach out for your free demo today.