Federal Deposit Insurance Corporation (FDIC): Safety and Security in the Banking Industry

The FDIC was created in 1933 to add stability to the failing banking industry.  The concept was simple: provide guarantees for funds on deposits in member banks.  Stability was necessary for the country to crawl itself out of the Great Depression. Since its inception, the FDIC and its guarantees have allowed the United States to prosper and gain confidence.

What the FDIC does guarantee and insure:

Individual Accounts: Individual accounts are accounts owned by one person and titled in that person’s name only. All individual accounts at the same insured bank are added together and the total is insured up to $250,000, with the exception of non-interest-bearing transaction accounts which are separately insured for the full amount. For example, if you have an interest-bearing checking account and a CD at the same insured bank, and both accounts are in your name only, the two accounts are added together and the total is insured up to $250,000. 

Individual accounts include:

  • Single ownership accounts
  • Sole proprietorship accounts
  • Agent, custodian, conservator accounts
  • UTMA accounts (minors)
  • Estate accounts 

Joint Accounts:  In addition to individual insured accounts, each person is entitled to a maximum of $250,000 coverage for interest-bearing deposits in all of his/her joint accounts. If a couple has a joint interest-bearing checking account and a joint savings account at the same insured bank, each co-owner’s shares of the two accounts are added together and insured up to $250,000, providing up to $500,000 in coverage for the couple’s joint accounts. 

Retirement Accounts: Certain retirement accounts are separately insured from any other deposits acCustomer may have at the same institution. These are deposit accounts owned by one person and titled in the name of that person’s retirement plan. Only the following types of retirement plans are insured in this ownership category:

  • Individual Retirement Accounts (IRAs) including traditional IRAs, Roth IRAs, Simplified Employee Pension (SEP) IRAs, and Savings Incentive Match Plans for Employees (SIMPLE) IRAs
  • Section 457 deferred compensation plan accounts
  • Self-directed defined contribution plan accounts
  • Self-directed Keogh plan (or H.R. 10 plan) accounts

All deposits that an individual has in any of the types of retirement plans listed above at the same insured bank are added together and the total is insured up to $250,000. For example, if an individual has an IRA and a self-directed Keogh account at the same bank, the deposits in both accounts would be added together and insured only up to $250,000.

The FDIC does not Guarantee or Insure:

  • Investments in stocks, bonds, mutual funds, municipal bonds or other securities
  • Annuities
  • Life insurance products even if purchased at an insured bank
  • Treasury bills (T-bills), bonds or notes
  • Safe deposit boxes
  • Losses by theft (although stolen funds may be covered by the bank’s hazard and casualty insurance)

Any other investment available to you will have some level of risk, some more, some less depending on the investment option. A word about risk, risk is not bad as long as you understand the possible exposure to loss and the exposure to gain.  Many of us accept a certain level of risk as well we should because with some risk we have potential for a greater gain.  Risk should be managed and blended with other assets that do not have risk exposure.

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