Is Your Cash Covered?

Today’s Friday Brief may not apply to everyone who reads it at this exact moment in time. In fact, it may be that it’s not applicable to some people who choose to read it at any point during their lifetime. After all, $250,000 sure sounds like a lot of money to keep in a savings account or CD, especially given the paltry amount of interest banks are paying these days. With that said, it seems like I keep running into more and more situations that call for keeping a large amount of cash on hand. If that’s true in your situation, then I think you’ll find this Brief helpful.

Generally speaking, you can keep up to $250,000 at an FDIC insured bank and sleep well at night knowing that your money will be available when you need it. FDIC (Federal Deposit Insurance Corporation) is an independent agency of the United States government, created in 1933, to protect bank account owners against the loss of their deposits if an FDIC-insured bank fails. The likelihood of such a scenario may be small but it can happen, therefore, it’s important to make sure the bank you choose is FDIC insured and that your deposits are under the appropriate coverage limits. The same goes for credit unions but they’re covered by a different organization – the NCUSIF  or National Credit Union Share Insurance Fund.

Figuring out how much of your money at a single bank is insured can be pretty straightforward if you simply keep your $40,000 cash cushion in a savings account at your local bank or credit union. But what if you just sold your house and you’re parking $400,000 of the proceeds at the bank until you find your next family home? Or you recently sold your rental property and you’re stashing $300,000 in cash while you wait for your next opportunity? Or, you’re a very conservative investor and you want to keep $500,000 of your nest egg in bank CDs? And what if you have $40,000 in a savings account, $200,000 in a business account, a $100,000 certificate of deposit and a revocable trust account with your kids listed as beneficiaries containing $100,000 all held at one FDIC-insured bank? How much of your total balance would by covered by FDIC or NCUSIF in those situations?

It is possible to have more than $250,000 at one insured bank or savings institution and still be fully insured but you would need to make sure that your deposits are held in some combination of the ownership categories that meets the FDIC rules. Here are the basic FDIC coverage limits?*

Single Accounts (owned by one person with no beneficiaries): $250,000 per owner

Joint Accounts (two or more persons with no beneficiaries): $250,000 per co-owner

IRAs and other certain retirement accounts: $250,000 per owner

Revocable trust accounts: Each owner is insured up to $250,000 for each unique eligible beneficiary named or identified in the revocable trust, subject to specific limitations and requirements.

Unfortunately, even with the FDIC coverage limits plainly listed, it can still be challenging to figure out how much money you can keep at a single bank without exceeding the limits of coverage. That’s especially true if you own multiple accounts with your spouse or family. I wish I could say that my years of experience enable me to calculate the exact amount of coverage available in every situation with 100% confidence.  But that’s not always the case, which is why I’m thankful for this handy calculator. It was created by the FDIC and it’s free for anyone to use. I used it to calculate coverage in each of the scenarios I listed above and found it to be a bit wonky but still useful tool for confirming coverage.

If you currently have more than $250,000 at a single bank, I recommend confirming that your total balance is covered by FDIC or NCUSIF. It’s also important to confirm that your financial institution is a member of one of the insurance organizations regardless of your account balance. You can always call or visit your bank get your answers. Or you can use these handy tools to complete both tasks, it should only take a few minutes…

For information on banks…

– Click here for more information about the FDIC.

– You can use Bank Find or call toll-free 1-877-ASK-FDIC to make sure your bank or savings association is insured by the FDIC.

-And here’s a link to the FDIC calculator I mentioned.

And for credit unions…

-Click here for more information about the NCUSIF.

-You can click here to make sure your credit union is insured by the NCUSIF.

-And finally, here’s a link to an NCUSIF calculator you can use to determine your coverage at your credit union.

These tools can be useful, but as is the case with any online calculator, you have to make sure you input the correct information otherwise the output won’t be worth much. And of course, please let us know if we can help with this or any other personal finance questions.

*These deposit insurance coverage limits refer to the total of all deposits that account owners have at each FDIC-insured bank. The listing above shows only the most common ownership categories that apply to individual and family deposits, and assumes that all FDIC requirements are met.

The content above is for informational and educational purposes only. The links are being provided as a convenience; they do not constitute an endorsement or an approval by Beacon Wealthcare, nor does Beacon guarantee the accuracy of the information.





Geoff Hall, CFP®
[email protected]

My wife, Crystal, and I have been married for 11 years and have two kids, Cooper (10) and Rhodes (8.) When I’m not spending time with them you might find me downtown serving at our church, pushing my limits during a mountain bike ride or having coffee with a friend in the Five Points area. I've been a financial advisor for 29 years and I'm thankful for the privilege of shepherding my family of clients through the ups and down of the markets, and of life for that matter.