Posted on 06/09/2010 3:27:39 PM PDT by Kaslin
Dear Carrie: If I have more than $250,000 at any one bank, should I consider using multiple banks to make sure it's all insured to the full $250K? If so, what's the best strategy? -- A Reader
Dear Reader: Even though the pace of bank failures has slowed down, it's always prudent to understand how your deposits are protected -- so thanks for a great question. Created back in 1933 in the wake of the Great Depression, the Federal Deposit Insurance Corporation (FDIC) protects the money you deposit in an insured bank, and it does it well: No one with an FDIC-insured account has lost a penny of insured funds since 1933.
Note the phrase "insured funds." The FDIC doesn't necessarily cover all your money, but it does cover your balance, dollar for dollar, up to $250,000 in a single account. FDIC insurance applies to checking and savings accounts, certain retirement accounts such as an IRA, and certificates of deposit (CDs). It does (SET ITAL) not (END ITAL), however, insure money that you invest in stocks, bonds, mutual funds, exchange-traded funds, insurance policies, annuities, municipal securities or money market funds. It is important to understand the distinctions. For example, many money market funds from broker-dealers have check-writing features, and many users treat these accounts like checking accounts -- but these funds are not FDIC insured.
TWO BANKS? NOT ALWAYS
I'll assume from your question that you have more than $250,000 in your bank. That may be OK, depending on what kind of accounts you have and how they are owned. A single account, owned by one person, is insured up to $250,000. A joint account is insured up to $250,000 (SET ITAL) per owner (END ITAL). An IRA held at an FDIC-insured bank is covered up to $250,000. If you hold another type of account -- such as a trust or corporate account -- check with your bank for the exact limits of your coverage.
As an example, if you and your wife each have $250,000 in individual checking or savings accounts, and you two also have an additional $500,000 in a joint checking or savings account, you're fine. You'll each have $500,000 of FDIC coverage, even if both accounts are at the same bank. But say you have a $100,000 CD and a $250,000 savings account with the same bank, both titled in your name only. In this case, you're only insured up to the $250,000 limit -- so you should think about moving the CD to another insured institution. Most broker-dealers make it easy to find CDs from multiple institutions, and each CD would be insured by each unique bank.
A LITTLE HISTORY AND A LOOK AHEAD
I should point out that the traditional coverage limit for FDIC insurance had been $100,000, but that figure was raised to $250,000 in 2008 as part of the economic bailout bill. Be aware, however, that on Jan. 1, 2014, the upper limit of coverage for non-IRA accounts will revert back to $100,000 (the $250,000 will stay in place for IRAs), which could prompt many people to establish multiple banking relationships. Originally, this higher coverage limit was going to expire on Dec. 31, 2009, but it was extended through 2013 in May 2009, according to http://www.fdic.gov/deposit/deposits/changes.html.
Historically, bank failures are uncommon, but as I write this column in June, more than 80 banks have collapsed so far this year. As a result, people can and do lose uninsured money. Therefore, it is prudent to understand the way FDIC coverage works and to structure your assets to get the maximum protection.
A final note: The FDIC website has lots of useful resources (www.fdic.gov), including a search feature that lets you check if your bank is FDIC-insured. Go to "Bank Find" for a calculator to help you understand which of your bank-held assets are covered (the "Electronic Deposit Insurance Estimator").
ping
Of course if the FDIC runs out of money, we’ll just print up piles of worthless cash to reimburse everyone......Buy Gold on the next dip.
Saving for our soon to be rainy day....
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What you said............
btt
Good information here. Another thing to note is (I believe this is still offered), Credit Suisse offers depositors a private, third party insurance option they pay for, that secures up to around one million USD. Albeit, the chance of Credit Suisse going under is slim to none without a SHTF situation.
who the heck has 250k ?
I wish I had such worries :)
The FDIC is backing 8,000 banks that have a total of $13 trillion in assets with a deposit insurance fund that is basically flat broke. In fact, the FDIC’s deposit insurance fund now has negative -20.7 billion dollars in it.
What do you mean if?
There are retires with that kind of money in the bank, as their investing horizon is short and they are more concerned with retaining their wealth than with return.
Most of the accounts with that kind of money in them though will be corporate as it would not require all that large of a payroll to require the account all paychecks are drawn from to be larger than FDIC limits.
You beat me to it. Oh, to have such worries!
People who work their entire lives and are responsible with money.
I guess that means a bunch of FReepers.
Just kidding
.money doesn't stop worry with 2 sons that have had major heart attacks before the age of 50 and another one a diabetic,( along with a husband died before the age of 51 from his one and only heart attack)... 1 thats sitting OK and 13 grandchildren, one in the Air Force with a democrat president. Money doesn't stop the worry...
Some things don't get fixed by money, but it helps... :O)
I know...I just don’t know anyone with the problem of not having enough banks to spread around their piles of 250k.
But the last people I’d trust to insure ANYTHING would be the federal gubermint.
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