Question: I inherited more than $250,000 in cash. Do you recommend leaving funds for the short term in a regular bank account that only has the normal $250,000 of FDIC insurance?
Answer: Bank failures have been rare in the past few years. When the FDIC closed the Enloe State Bank of Cooper, Tex., in May, it marked the first bank failure since December 2017. If your money is in a large bank, it’s extremely unlikely that it will go under, and your risk is even lower if you don’t plan to leave the excess deposits in the bank for long. But if you want the peace of mind that this important federal protection provides, there are several steps you can take to make sure the amount of the estate that exceeds the limit is insured.
The FDIC insures up to $250,000 per person, per bank, per ownership category. (Credit union deposits are insured under the same terms by the National Credit Union Share Insurance Fund.) Coverage is automatic whenever you open an account at an FDIC-insured bank (you can check an institution’s eligibility at https://research.fdic.gov/bankfind). Checking accounts, savings accounts, money market deposit accounts and certificates of deposit are covered by insurance. Annuities, mutual funds, stocks and bonds aren’t covered, even if you buy them from a bank.
If a bank closes, the FDIC usually pays insurance within two business days, either by providing depositors with a new account at another insured bank or by issuing a check for the insured balance of the account at the failed bank. Customers with uninsured deposits won’t be reimbursed until the bank is liquidated, and they may receive only a portion of their savings.
One of the easiest ways to increase the amount of insured deposits is to open accounts under different ownership categories. If you and your spouse or significant other have a joint account (or accounts) at an FDIC-insured institution, you’ll each receive $250,000 in coverage for your joint-account balances, plus $250,000 per person for any individual accounts you have, for a total of up to $1 million.
Another way to increase coverage is by spreading your money around to multiple FDIC-insured banks. If you’re looking for competitive rates, MaxMyInterest.com will spread your cash among high-yield savings accounts at insured banks for a quarterly fee of 0.02% of your cash balance. If you want to invest in CDs at multiple insured institutions, go to the Certificate of Deposit Registry Service (www.cdars.com).
Block joined Kiplinger in June 2012 from USA Today, where she was a reporter and personal finance columnist for more than 15 years. Prior to that, she worked for the Akron Beacon-Journal and Dow Jones Newswires. In 1993, she was a Knight-Bagehot fellow in economics and business journalism at the Columbia University Graduate School of Journalism. She has a BA in communications from Bethany College in Bethany, W.Va.
Holiday Shopping? Here’s Why Some Stores May Let You Keep Your Returns
With the holiday shopping season in full swing, you're likely to find more stores shunning returns in favor of a 'keep-it' policy, study finds.
By Jamie Feldman Published
Stock Market Today: Stocks Swing Higher After Powell Speech
Fed Chair Powell poured cold water on potential rate cuts, but stocks jumped anyway.
By Karee Venema Published
1-Year CD Rates December 2023
Savings Many 1-year CD accounts are already offering rates of 5% or more. We look at the options on the market.
By Erin Bendig Last updated
What Is a High-Yield Savings Account?
A high-yield savings account is essentially the same as a traditional account with one key difference — it pays a higher than average APY on deposits.
By Erin Bendig Last updated
Trusting Fintech: Four Critical Moves to Protect Yourself
A few relatively easy steps can help you safeguard your money when using bank and budgeting apps and other financial technology.
By Shane W. Cummings, CFP®, AIF® Published
Four Steps to Prepare Your Finances for Divorce
Divorce is rarely easy, but getting financial paperwork in order, working with professionals and making tough decisions now can take some of the stress out of it.
By Marcy Keckler, CFP®, CRPC® Published
How to Open a Savings Account Online
You may be wondering how to open a savings account online. The process is usually simple and straightforward — with just a few steps you’ll be able to start saving your hard-earned cash.
By Erin Bendig Published
10 Easily Fixable, But Often Overlooked, Financial Planning Items
personal finance It’s easy to let important financial tasks slip your mind, so take a minute to check this list for any to-do items you may have forgotten. It could make a big difference in your bottom line.
By Roxanne Alexander, CFP®, CAIA, AIF®, ADPA® Published
How to Keep Your Savings Safe
savings If you want to keep your savings safe but they exceed FDIC and NCUA limits, it's time to open multiple accounts, preferably ones with high yields.
By Rivan V. Stinson Last updated
Money Market Account or Money Market Fund? How to Choose
money market accounts Whether you choose a money market account or money market fund largely depends on the money's purpose.
By Lisa Gerstner Last updated