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Protecting Your Cash Beyond the FDIC Safety Net
- Sabine Franco
- 3 days ago
- 3 min read
When your savings exceed FDIC insurance limits, it’s time to be proactive in protecting your hard-earned wealth. The Federal Deposit Insurance Corporation (FDIC) covers deposits up to $250,000 per person, per bank, but what happens if your savings go beyond that limit? Understanding how to safeguard those extra funds ensures that your financial legacy remains secure, even in uncertain times.
Understanding FDIC Insurance: What You Need to Know
FDIC insurance was created in the aftermath of the Great Depression, providing protection for depositors when banks fail. It covers up to $250,000 per depositor at each insured bank for each account ownership category. For example, a single account, a joint account, retirement accounts, and trust accounts are all considered separate categories with their own insurance coverage.
Imagine Maria has several accounts at First National Bank:
A personal checking account with $100,000
A joint savings account with $300,000
An Individual Retirement Account (IRA) with $200,000
Maria’s personal account is fully covered ($100,000). The joint account provides $250,000 in coverage for each person, meaning her $150,000 share is protected. Lastly, her IRA is fully covered up to $200,000. In total, she has $450,000 protected at this bank, even though she has more than $250,000 in one account.
What to Do When Your Savings Exceed FDIC Limits
While having a savings account that exceeds the FDIC limit is a great problem to have, it does pose potential risks if not managed properly. To protect your savings, consider the following strategies:
1. Spread Your Funds Across Multiple Banks
One of the easiest ways to ensure full FDIC protection is by dividing your money among different FDIC-insured banks. For example, if you have $750,000 in savings, you can deposit $250,000 in three separate banks. This ensures that all of your savings remain covered by FDIC insurance. While this method requires you to manage multiple accounts, it effectively multiplies your protection.
2. Use Different Ownership Categories
If you prefer to keep your accounts with one bank, another strategy is to use different account ownership categories. A married couple, for example, can each have individual accounts covered for $250,000, plus a joint account that provides an additional $500,000 in coverage. By carefully structuring your accounts, you can maximize FDIC insurance coverage at a single bank.
3. Consider Certificate of Deposit (CD) Laddering
CD laddering involves purchasing CDs with different maturity dates across multiple banks. This strategy allows you to take advantage of FDIC insurance while also earning interest. As each CD matures, you can decide whether to reinvest the funds or move them to another bank, ensuring your savings remain protected.
4. Look Into Credit Unions
Credit unions, insured by the National Credit Union Administration (NCUA), offer similar coverage to FDIC insurance, typically up to $250,000 per depositor. Using credit unions in addition to traditional banks can further diversify your deposit protection.
5. Consider Alternative Financial Products
Cash management accounts and Treasury securities can provide additional layers of protection. These options are backed by brokerage firms and the U.S. government, respectively. However, it’s important to evaluate the risks, especially if you're concerned about the U.S. debt crisis.
Creating a Protection Plan for Your Legacy
Ensuring the safety of your savings goes beyond just securing your money—it's about creating a strategy that fits your overall financial and estate planning goals. Start by taking stock of all your accounts and how they are structured. From there, you can implement the best protection strategy for your situation.
Do you prefer the simplicity of using multiple banks, or the convenience of consolidating accounts with different ownership structures? Whatever approach you choose, taking the time to protect your wealth today will ensure that it benefits you—and your loved ones—for years to come.
By evaluating your accounts, considering strategies like multiple bank deposits or CD laddering, and consulting with a trusted advisor, you can ensure your savings remain safe and sound, even beyond the FDIC’s safety net.
This article is a service of The Ambitious Legacy Firm. We do not just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That's why we offer a Legacy Planning Session, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by using the link below to schedule a call with our Client Services Director, who will be able to guide you on scheduling your Legacy Planning Session, or by emailing us at legacy@franco-lawfirm.com. Mention this article when you contact us to find out how to get this $750 session at no charge.
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