Federal Employee's CSRS & FERS Federal Civil Service Retirement
& Financial Planning Resources
FDIC Coverage
With the recent bank failures, and possibly more to come, retirees are
understandably worried about their bank deposits and Federal Deposit Insurance
Coverage (FDIC). All of the major news networks covered this subject recently
and I believe much of that coverage was misleading and left viewers ill advised
about the scope of their FDIC coverage.
When this subject was first presented on this site the Maximum FDIC coverage
was limited to $100,000 for single accounts and $250,00 for IRAs. In 2009 the
Federal Deposit Insurance Corporation (FDIC), which preserves and promotes
public confidence in the U.S. financial system by insuring deposits in banks and
thrift institutions, increased coverage up to $250,000 (through December 31,
2013).
After 2013 the insured amounts may decrease to it's previous levels. FDIC insured banks
now cover up to $250,000 that you have
deposited in checking, savings, and NOW accounts, certificates of deposit (CDs),
money market deposit bank accounts, and $250,000 in IRA retirement accounts in
any one bank per depositor. What most don’t realize is that FDIC insurance
coverage expands substantially above the $250,000 limit for special kinds of
accounts or ownership categories. The key to expanding your coverage in one bank
is to register your accounts differently within the same bank and by establishing formal or informal
revocable trust account designations where appropriate. Designating bank
accounts (ITF) In Trust for or (POD) Pay on Death or
setting up Wills and Revocable Trusts permits you
to extend your coverage dramatically and this type of registration also helps
you avoid probate when settling an estate. You can also open accounts
in other banks and receive the same FDIC protection. For example, if you have
$250,000 each in two different FDIC insured banks you are covered for up to
$500,000 if both banks fail.
The FDIC guide located online at
http://www.fdic.gov/deposit/deposits/insured/yid.pdf shows an example of POD
accounts with multiple owners and beneficiaries on page 13 that provides
$1,000,000 in FDIC coverage at one bank. One news report stated that the FDIC
doesn’t cover safe deposit box contents and that is correct. The FDIC only
covers deposit accounts. However, they failed to explain that in the event of a
bank failure, in most cases an acquiring institution would take over the failed
bank's offices, including locations with safe deposit boxes. If no acquirer can
be found the FDIC would send box holders instructions for removing the contents
of their boxes. The FDIC advises safety box holders to read the contract you
signed with the bank when you rented the safe deposit box in the event that some
type of insurance is provided; some banks may make a very limited payment if the
box or contents are damaged or destroyed, depending on the circumstances. If you
are concerned about the safety, or replacement, of items you have put in a safe
deposit box, you may wish to consider purchasing fire and theft insurance.
Usually such insurance is part of a homeowner's or tenant's insurance policy for
a residence and its contents. Again, consult your insurance agent for more
information.
Use the following checklist and resources to determine your actual FDIC coverage at each bank that you have funds
deposited. I used all of these resources and found them to be easy to
use and very helpful. The EDIE Calculator allows you to enter all of your
account information and registrations to show you exactly what is and isn’t
covered at your bank. A great tool and I highly recommend using it to make sure
your accounts are fully covered.
The FDIC does NOT insure stocks, bank brokerage accounts, mutual funds
including mutual fund money market accounts or other non-deposit investments.
The FDIC only covers the deposit accounts listed earlier in this article.
However, the Securities Investors Protection Corporation (SIPC), a non
government entity, replaces missing stocks and other securities in customer
accounts held by its members up to $500,000, including up to $100,000 in cash,
if a member brokerage or bank brokerage subsidiary fails. For more information
contact www.SIPC.org.
FDIC Check List:
- Determine if your bank is FDIC insured: Go to
Bank Find
- Use the EDIE Calculator to determine
your total FDIC coverage
- Research ITF and POD account
designations to expand coverage
- If your deposits exceed your coverage at one bank, open accounts at other FDIC
insured banks. Each bank is insured separately
- For non-deposit investment accounts such as brokerage accounts contact
www.SIPC.org.
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