Kiplinger Today


Is My Money Still Safe?

Editor's Note: This is an updated version of the story, reflecting new details and developments.

As the financial panic of 2008 deepens, with markets in free fall and the economy at risk, it's instructive to remember the failure of IndyMac bank last summer. At first, nervous customers lined up to withdraw their money, unaware that their savings were insured by the Federal Deposit Insurance Corp. The panic subsided when the facts became known. Here are the facts now.

The good news: The FDIC has taken over 12 more banks since IndyMac's collapse without incident. And the $700 billion financial rescue plan signed into law Oct. 3 increases the insurance on most bank deposits from $100,000 to $250,000 per person per bank. The bad news: Hundreds more banks are expected to fail before this financial crisis plays itself out. If you are worried about the safety of your money -- in banks or brokerages -- or money you’ve paid your mortgage servicer for taxes or insurance, here are answers to your pressing questions.

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Should I worry about the safety of my bank accounts? In most instances, your money is insured by the FDIC, which is backed by the full faith and credit of the U.S. government, up to a limit of $250,000 at each bank. This new, higher limit is effective through December 31, 2009. Add up all the accounts in your name at a bank, including checking, savings and money-market accounts as well as certificates of deposit. If your funds total more than $250,000, move the excess to another bank.

My spouse and I have a joint checking account, and each of us has individual savings accounts at the same bank. How much insurance does each of us have? Each co-owner of a joint account has $250,000 in insurance, and your individual accounts are each insured for $250,000, for a total of $1,000,000 in this example.


If you want to shelter more cash, you can open revocable-trust or payable-on-death (POD) accounts for your spouse, children, grandchildren, siblings or almost anyone you desire. Each beneficiary’s account is insured up to $250,000. Or you can just move the excess cash to another bank.

My retirement-savings accounts are with my bank. What is the maximum coverage for them? Certain types of retirement accounts are covered by FDIC insurance, including IRAs, Roth IRAs, SEP IRAs and Keogh plans. All deposits in these types of accounts are added together and insured up to $250,000 per person. If you have both a regular and a Roth IRA, the assets would be added together and insured up to $250,000.

I bank at a credit union. Is my money insured? Yes. The National Credit Union Share Insurance Fund (NCUSIF), which was established by Congress and is backed by the U.S. government, insures individual accounts up to $250,000. As with FDIC insurance, a two-person joint account is insured up to $500,000.

Are my credit-union retirement accounts insured? Yes, the NCUSIF covers retirement accounts, too. The funds in traditional and Roth IRAs are added together and insured up to $250,000; Keogh accounts are insured separately up to $250,000. If you have both IRAs and a Keogh at your credit union, you can have a total of $500,000 in insured retirement assets.

I have a bank money-market account. Are those funds insured? Yes, but your money-market deposit account is lumped with all other accounts bearing your name, and together they are insured up to $250,000. Money that you keep in a money-market mutual fund may also be insured. The Treasury recently announced a temporary program to guarantee both taxable and tax-free money-market mutual funds if the fund pays the necessary fee to participate. This insurance program was created after the Prime Reserve Fund "broke the buck" and its share price dropped to 97 cents. It guarantees that money-market funds’ share price will not fluctuate -- that it will remain a constant $1.

If the FDIC takes over my bank, as it recently did with IndyMac Bank, how long will it take for me to have access to my money? IndyMac's depositors had continuous access to their funds through ATM and debit cards. After federal regulators seized the bank on a Friday, some customers did not have online or phone access for a weekend, but everyone had full access to all their insured money by Monday morning.


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