How safe is your money?

Ever since the explosion of IndyMac, we've been getting lots of e-mails from our readers, wondering, "just how safe is my money?" As someone who doesn't hold even five figures in her bank account, I'm not at much risk of losing my (ahem) life's savings. But you're frightened, so let me answer some common questions about FDIC insurance for you:
  • What kind of accounts are insured? Checking, savings, money market deposit and certificate of deposit accounts; also, some kinds of retirement accounts, including IRAs and Keogh accounts.
  • How does the $100,000 limit work? If you hold any combination of accounts at one bank -- checking, savings, CDs, whatever -- your accounts are added together for insurance purposes. The only way to get past the $100,000 limit is if you have an IRA or certain other kinds of retirement accounts; these accounts are insured up to $250,000.
  • What if I have a joint account? Each person gets his own $100,000 cap; so if you and your life partner share a savings account (or group of accounts), they will be insured up to $200,000.
  • What other exceptions are there to the $100,000 limit? If you're blessed with significantly more than $100,000 per family member in funds, you can set up living trusts or payable-on-death trusts for siblings, your spouse, your parents, or your children, and each beneficiary will add $100,000 to your limit (and yes, you can have reciprocal trusts; your sister can have a trust with you as the beneficiary, and you can have one with her as the beneficiary, and each is insured up to $100,000).
  • Should I move my money?Zac Bissonnette wrote about this in January. If you're asking the question, you probably should move your money. If you consider your financial institution to be the steadiest and most reputable around, leave it be. Otherwise, find a bank that fits with your comfort level.
  • What about credit unions? Credit unions are insured by a separate organization, the NCUA (National Credit Union Association). The rules are generally identical to those under the FDIC; the NCUA is also a federal organization and has never failed to pay out money to consumers when an institution failed.
  • Will all the banks fail? I don't think so. Although I think they'd be smart to stop making so much of their income from overdraft fees...
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