Recently, Pasadena-based IndyMac Bank was seized by the federal government in what is called the second-largest bank failure in U.S. history. Many were left stunned wanting to know what exactly would happen to their money- their life savings. We always here about how banks are guaranteed and have what’s called FDIC insurance. But what exactly is it and how does it work? Let’s find out.
FDIC Stands For….
First off, FDIC stands for Federal Deposit Insurance Corporation. It was created by the Glass-Steagall Act of 1933 to provide deposit insurance for checking and savings deposits in member banks. The vast number of bank failures of the great depression motivated congress to put something into place.
How Much Is Covered With FDIC?
The basic insurance amount is at least $100,000 per depositor, per insured bank. Also, Individual Retirement Accounts (IRA’s) are insured up to $250,000. So a single person could have a $100,000 CD and $250,000 in their IRA with the same bank and they would be insured for up to $350,000.
Also, it is possible to have multiple accounts with different legal ownership, but the person must have an equal right to the money and must be a person. For example, you could have $100,000 in an individual account, $100,000 in an account with you and your brother, and $100,000 with you and your uncle and would qualify for insurance on all three.
POD Accounts and FDIC
Another option to also be aware of are POD (Payable-On-Death) accounts. This goes for Trust accounts as well. The owner of a POD account is insured up to $100,000 for each beneficiary as long as they meet certain requirements. For example, if an individual sets up a POD account with his three children as beneficiaries, he would be covered for up to $300,000 of FDIC insurance. Adding beneficiaries just to satisfy FDIC insurance levels is not recommended.
Still not sure if you are covered? Just go to www.fdic.gov/edie and fill out the insurance estimator to find out.
References: www.fdic.gov
Securities offered through LPL Financial, Member FINRA/SIPC.
{ 1 comment }
The timeliness of the payout isn’t set though. You are insured for the amount, but when you will get the money isn’t explicitly set.
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