Keeping Your Money Safe

September 24, 2008

With everything going on in the financial world lately – the Treasury taking over Fannie Mae and Freddie Mac, the collapse of Lehman Brothers and IndyMac Bank, and the government bailout of AIG – it’s no surprise that investors are wondering if their money is safe.

Thankfully, there are safety measures in place for various types of accounts and investments.  Here is a rundown of the different safetynets in place for each type of account or investment you may have:

Banks:  Bank deposits are ensured by the Federal Deposit Insurance Corporation (FDIC).  Basically, the FDIC insures deposits up to $100,000 per owner, per bank.  If you have $100,000 or less in your name at any FDIC-insured bank or savings association, you have nothing to fear.   Since the limit is per owner, that means you could actually have more coverage than you think (for example, if you and your spouse have a joint account with $300,000 at one bank, $200,000 is insured – $100,000 for each “owner”).

In addition, if you have certain types of retirement accounts, such as an individual retirement account, you’re eligible for even more coverage – up to $250,000 per owner, per bank.  However, the FDIC does not insure money invested in stocks, bonds, mutual funds, life insurance policies, annuities and municipal securities, even if you bought those investments at an FDIC insured bank.

If you want to make sure that your deposits are below the FDIC limits, please visit EDIE The Estimator.   EDIE the Estimator can calculate your FDIC insurance coverage for each FDIC-insured bank where you have deposit accounts.

Credit unions have similar coverage through the National Credit Union Administration (NCUA).

Mutual Funds and Brokerages:  Some investors are wondering what would happen in the event that the mutual fund or brokerage company they hold their investments at would fail.  The funds that you own at a mutual fund company or a brokerage account are separate from the company’s assets.  So in the event of a company failure, your assets would not be liquidated to pay the company’s debts.  If the mutual fund or brokerage company failed, your assets would just be transferred to another brokerage company.

However, if any of your assets come up missing, whether it’s due to company failure, fraud or poor recordkeeping, you are protected.  The Securities Investor Protection Corporation (SIPC) is a non-profit corporation that protects investors if a broker/dealer defaults.  Investors are protected up to $500,000 per account, per brokerage company.

Note that the SIPC doesn’t cover all investments.  Some that aren’t covered includ annuities, commodity futures contracts, foreign currencies, limited partnerships and precious metals.  Also, the SIPC isn’t providing protection against market losses or bad investments. The purpose of the SIPC is to replace securities that are missing from customer accounts, up to the limits of its coverage.

Now that you are aware of the limits, both at banks and brokerage or mutual fund companies, the best way to protect yourself is to make sure that you are not above the insured limit at any of the financial institutions you do business with.  If you are, you may need to open different ownership type accounts or open new accounts at different institutions to ensure that your money is safe.  In addition, not all CDs and deposit accounts are FDIC insured.  Before you purchase an investment, make sure it is covered by the appropriate agency, and do your research to determine if you are investing with a reputable company.


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Beacon Financial Advisors, LLC, is a fee-only financial planning and Registered Investment Advisory firm headquartered in Lee’s Summit, Missouri and serving the greater Kansas City area.

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About Us

Kristine McKinley, CFP®, CPA, is the founding principal of Beacon Financial Advisors, LLC, an independent, fee-only financial planning firm located in Lee’s Summit, Missouri and serving the greater Kansas City area.

Kristine focuses on providing fee-only financial planning, investment advice, and tax preparation to individuals and families from all income levels.  About Us

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Kiplinger Magazine/NAPFA – Kristine McKinley answered reader’s tax questions during the 2013 Jump Start Your Retirement Plan Days sponsored by Kiplinger magazine and the NAPFA Consumer Education Foundation.