Money in the Bank: Is It As Safe As You Think It Is?

The term “Money in the bank” is usually used to describe something that’s safe. That’s a sure thing. That’s solid as a rock.

That is, unless the bank you’re talking about is IndyMac.

You see, this past weekend, IndyMac failed. Yup, it up and went under. And Uncle Sam had to come to its rescue in the form of the Federal Deposit Insurance Corp. (FDIC).

“So what?”, you might say. “The money in that bank is insured.”

Uh, are you sure?

While reading a great article on today’s MarketWatch.com by Eva Rosenberg, I learned that not all banks are FDIC-insured. But luckily, IndyMac is.

I also learned that there’s insurance that goes beyond the limits that the FDIC insures.

Before we get to this additional insurance, let’s be clear about what the FDIC does insure. Each account is insured up to $100,000. Each joint account is insured up to $200,000. And each retirement account (IRAs, Roth IRAs, SEP IRAs, SIMPLE IRAs, Section 457 plans, Keogh plans and a few others) is insured up to $250,000.

Now, what about that extra insurance?

Well, if you live in Massachusetts, all state chartered savings banks are required to extra coverage through the Depositors Insurance Fund (DIF) (more info here).

OK, that’s great if you live in Mass. But what about the rest of us?

Luckily, there’s an insurance called CDARS (Certificate of Deposit Account Registry Service) that insures Certificates of Deposit up to $50 million.

To get the lowdown on the ins and outs of this additional insurance, check out Eva’s article. It just may help to keep your money in the bank as safe as “Money in the bank.”