Nobody likes to lose money. Unfortunately, between 1929-1933 many innocent investors lost loads of cash due to a series of bank failures. Because of this, the Federal Deposit Insurance Corporation was established. In 1934, the insurance limits began at $2,500, rose to $40,000 in 1974, and have since PERMANENTLY been set at $250,000.
It’s important to understand that this insurance limit is based on each depositor per bank. Therefore, by changing the ownership on your bank accounts, you could easily insure well over $250,000 without spreading your money between multiple banks.
I thought this was common knowledge, but I’m finding more and more that it’s not. Let’s take a look at how someone can achieve greater than $250,000 of FDIC insurance.
If You’re Single…
You’re fairly limited if you’re by yourself (sorry). You could have $250,000 in a taxable account (checking, savings, etc.) and $250,000 in an IRA. If you need someone to add to your accounts in order to receive more coverage, I’m more than willing!
Total Insured: $500,000
If You’re Married…
There are a few more possible combinations if you’re hitched. You could have $250,000 in a taxable account and $250,000 in an IRA, and your significant other could do the same. In addition, you could open a joint account insured up to $500,000. This already gives you $1.5 million. Lastly, you could gain an extra $500,000 in coverage by both opening accounts with the other listed as Payable on Death (POD).
Total Insured: $2,000,000
If You’re Married With Children…
Alright Al Bundy, you’re in luck! By adding your children as POD’s to your accounts, you can gain an additional $500,000 per child (you and your wife must do this). You can finally retire from the shoe store!
Total Insured: $3,000,000 (2 kids)
Something To Think About
While it’s great that we have this additional coverage which allows us to sleep at night; if you ever have this much money in short-term deposits, I’ll be extremely disappointed in you.
Remember the hypocrisy of “conservative” investments. While you may not be “losing money” (thanks to FDIC insurance), you are certainly losing purchasing power. I would much rather see your $3,000,000 turn into $6,000,000 and $9,000,000 through wiser investments.