How Do I Protect More An Excess Of $100,000 In The Bank?

Question

I'm asking this question because I'm watching a report on CNN about the closureof Indy Mac, and they're basically saying that people with funds the exceed the FDIC amout of $100,000 are basically screwed.

So what do I do if I have $500,000 and want to put it in the bank, do I have to split it amongst 5 different banks, or is there a better way to place all the money in one instituiton fully secured?

Answer 1

Depending on your situation and how important it is to you to keep the money in one bank, it can be done.

As you already know, the account of a single person is insured to $100K.

If you have one or more joint accounts, your coverage for all of them put together is another $100K, besides the $100K for a single person. Now you're at $200K total insured.

A retirement account (IRA or Keogh) is also insured up to $250K, irrespective of the other accounts. Now it's up to $450K - almost there.

If you've got substantial assets, you will want to do some estate planning. An account in the name of your living trust is covered - ready for this? - $100K per beneficiary. If you're leaving $100K or more to each of 3 people, then this account would then be insured for $300K. Way over your $500K query. But we don't have to stop here...

A corporate account would also have a separate $100K insured limit. So, how many corporations would you like to have? Note that there are legal costs for incorporating, and in some states (e.g., California) there are annual maintenance fees that can take some of the fun out of it.

Now, a person with $10 million is not likely to set up a zillion corporations just so he can keep all of his eggs in one basket. However, if he uses a few of these techniques - a living trust and a few corporations -  he can easily get to an insured limit of, say, $1 million per bank, and then spread his investments over 10 banks to cover the whole shebang.

In the real world, a person with $10 million - or even $500K - is likely to have better opportunities than the miserable rates offered for bank CDs. A brokerage account is insured by SIPC up to $500K, with a limit of $100K coverage for uninvested cash in the account.

One other factor is that it is possible to investigate the financial integrity of a bank, so that a person can feel comfortable making deposits far above the insured limit.

One last comment: There is no need to defend yourself against obnoxious comments by others. Making money, and then saving and investing it, is an old-fashioned but very American way of life. I highly recommend it.

Best of success.

Answer 2

i don't know about banks or indy mac or any of that other stuff that you are talking about but i do know that there are millionaires and billionaires all over this country whith money in the banks and they are not running to the banks to get all of their money out so you should not even worry about putting money in the bank.i also want to know why do you have over a half a million dollars sitting at home?what are you a drug dealer?

Answer 3

Split it up if you really want to protect it.

I still find it interesting that it appears that the FDIC is talking about still insuring more than the 100,000, min.  and also going to payoff on uninsured accounts.

If they do what is the use of the FDIC ?

Answer 4

Plain old bank accounts are insured up to $100K.  I believe retirement (IRA) accounts are insured up to $250K.  I would split my money into 5 different accounts.

Answer 5

You can split it up between 5 different banks. You can also buy US Treasury notes which have full credit and faith of the US government behind them. You can also buy a money market fund from a trusted mutual fund which has never had a default, but they aren't guaranteed. You also should consider to have at least some of your assets in a stock mutual fund. There are no guarantees at all with them, but over the long haul they return a heck of a lot more than bank accounts do. You should be diversified.

Answer 6

Yes, invest it in 5 different banks. Thats what normal people do.

Answer 7

I'm NOT a financial expert (boy, is THAT an understatement!) but if you don't want to split your 1/2 million into separate accounts, you should probably get most of the money out of your savings account.

Try a 100% T-bill mutual fund money market (or get T-bills direct from the government). No matter how shaky our government is, most experts say it will be the last to fall in case of a complete financial collapse. Banks may fold, but the government can print up more bills whenever it needs to.

However, if I had half a million in the bank, I don't think I'd rely on the Yahoo answer line for my advice.

Answer 8

~~Since money is only insured for up to ~100,000.00-that means you would have to split it between different banks to always keep it secured.~~

Answer 9

All banks are covered up to 100,000 under FDIC since the Great Depression and so many private banks failed. The only way to avoid this is to put only 100,000 in five different banks or take the money out in cash and bury in your backyard.