Understanding the FDIC Account Insurance Program
Do you really understand how the government (FDIC) insures your bank accounts? Bank account insurance provided by the government is also known as the FDIC Account Insurance Program. I always thought that accounts with the same Social Security or Tax ID number were linked together for purposes of the FDIC insurance limit, but that is not true. It is also based on the account type. You can easily determine if all your accounts are insured by going to this website and entering in the types of accounts you have: https://www5.fdic.gov/edie/
I’ll make this a little easier for you by giving you the following summary of accounts and their insurance limits. Each line is a different account:
- Husband’s account $250,000
- Wife’s account $250,000
- Joint Account with Husband & Wife $500,000
- Husband’s IRA and/or ROTH IRA $250,000
- Wife’s IRA and/or ROTH IRA $250,000
- Joint Account with Husband & Wife (with POD election) $500,000 (per beneficiary)
- Family Partnership, Business, other entities (each with different Tax ID) $250,000 each
All the above assumes all the accounts are at ONE institution. You could have the same accounts at another institution and have a separate insurance limit. Assuming you had all the above accounts, 2 beneficiaries on the Joint account with POD, and one partnership/business account, those accounts would have $2,750,000 of insurance.
Double Insured limit at TD Ameritrade
TD Ameritrade is the custodian of our clients’ accounts, and they have an “Insured Deposit Account” where we hold their cash. TD Ameritrade has an arrangement where they use two banks to hold the money in their Insured deposit account. Thus, the insurance limit is DOUBLED. So, the above accounts would be insured up to $5,500,000!
Most “money market” accounts at brokerage firms are NOT insured. Be sure and know the difference between money market accounts and insured accounts. The insurance only applies to accounts at banks that are part of the FDIC program.
In summary, you can insure a lot of money at even one institution if you create and style your accounts properly. We call this Cash Management. Give us a call if you need some help managing your cash!