Tuesday, July 5, 2011

FDIC – NCUA -- SIPC – US Treasury – Who’s Got Your Back?

With bank failures, crooked funds managers and brokers, and warnings of the US government not being able to pay its bills, you might be wondering if your money is really safe. Well, that’s a good question. If the US Government cannot pay its bill, we have a huge problem. And by “we”, I mean everyone in the world. Investing or loaning money to the US government has historically been considered to be risk-free. However, if you’ve been listening to the news lately, you’ve heard about the national debt and the growing concern about being unable to repay it.  For this discussion I’m going to assume that Uncle Sam can still pay the bills.

FDIC
If you deposit your money in an FDIC insured bank and the bank fails, you’ll probably be working with the FDIC to recover your deposits. The FDIC claims “Since the FDIC was established in 1933, no depositor has ever lost a single penny of FDIC-insured funds”.  The key words are FDIC-insured funds.   You may not be able to recover all of your money. First off, there is an upper limit of $250,000 per account. So, if you have more than that in one bank, you may not be able to collect the excess funds. Also, there are restrictions on the accounts that are covered. For example, covered accounts are Savings, Checking, CDs, and Money Markets.  Many banks offer investment products like mutual funds, annuities, life insurance policies and stocks and bonds; these are not FDIC insured. 

Remember, the value of all of your accounts is insured up to $250,000. So, if you have $200,000 in a CD, and $100,000 in a savings account, you can only recover $250,000 instead of $300,000.

You may be able to have more than $250,000 insured in a single bank. The FDIC says “The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category.” The “account ownership category” part opens up some additional coverage.  Here’s how it works. You can have both an individual account and a joint account. In each account, you’ll have the $250,000 of coverage. So your total coverage is $500,000. In fact, you can also have an IRA account that will be covered up to $250,000.

The FDIC has an excellent tool that can help you determine your coverage. For more information, visit their website at FDIC Calculator

NCUA
If you belong to a Credit Union, your deposits are insured by NCUA (National Credit Union Administration) instead of the FDIC.  Like the FDIC covered accounts, NCUA covered accounts are backed by the full faith and credit of the US Government.  As I went through the NCUA website insurance discussion, I could not see any difference between FDIC vs. NCUA.  In fact, they also have a calculator to help you determine your coverage, see NCUA Tool. The interface looks suspiciously like the FDIC tool. As far as I can tell, you can read my FDIC section, replace bank with credit union and replace FDIC with NCUA.
Brycast Financial Planning in Austin Texas --- We Can Help
Income Tax Preparation in Austin Texas
contact: service@brycast.com http://www.brycast.com/
Enrolled Agent; Investment Advisor

No comments:

Post a Comment