| How are my funds protected in an FDIC insured account? |
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| News - Hugh's Views | |||
| Written by Hugh McManus | |||
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The money is safe up to a certain limit. For example, if you have up to $100,000 in cash, you're fine. Most money market funds seem to be safe too. You can always contact the bank to find out if a money market fund is FDIC insured. Here are some FDIC links:Question Check if a bank is FDIC insured. What is not insured by the FDIC. Learn all about the insurance fund. Certain types of retirement accounts are insured up to $250,000
If you own deposit accounts in different ownership categories, you may qualify for more than $100,000 for deposits at a given bank. The second link above talks about this point. I think if you have more than $100,000 in a single account or $250,000 in an IRA, it may not be possible to recover the full value of the excess (amount over $100k or $250k, respectively). There are examples, recent examples, of bank failures where people recovered everything. For IndyMac Bank, the FDIC initially said that excess funds would be paid at 50 cents on the dollar; I don't know if that situation has changed. So, the money is safe, but it is my understanding that, during the weekend that the FDIC moves in, it could be difficult to access the funds. Now, in recent closures in Georgia and Arizona, people didn't notice any difference. The FDIC had a buyer for the bank; so ATM's, etc, worked just fine. For IndyMac Bank, funds weren't readily available until the following Monday. I don't believe there's any place that's totally safe. Some of the bigger banks look significantly more secure than, say, WaMu where I have an account. Ironically, I think that the safest bank in my area is likely to be IndyMac Bank, since it's run by the FDIC. I figure if the FDIC were to let IndyMac fail twice, there could be a serious to catastrophic loss of confidence in the banking system. If I had more than $100,000 in an account, I'd likely try to split it up into two or more banks. Actually, a brokerage account, covered by SIPC, can often have more insurance than an FDIC covered bank account.
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