Are IRA Accounts Up to $250,000 Insured by the FDIC?

by Herb Kirchhoff

    The Federal Deposit Insurance Corporation insures deposits at U.S. banks and thrift institutions. Its counterpart, the National Credit Union Administration, insures deposits at credit unions. These agencies will protect certain assets in your individual retirement arrangements, but there are other IRA assets offered by financial institutions that the FDIC and NCUA do not protect.

    What's Protected

    The FDIC and NCUA insure IRA funds deposited in savings accounts and certificates of deposit. They also insure money market deposit accounts where the interest you get is based on money market rates but your deposit is never at risk. The federal deposit insurance limit as of 2012 was $250,000. If you have two or more IRA accounts at a particular institution, the limit applies to the collective total on deposit there. If you have IRA deposit accounts at two or more financial institutions, the total on deposit at each of those institutions is insured to the $250,000 limit.

    Assets Not Covered

    These agencies don’t cover investment products, even if they are sold for your IRA through an insured financial institution. There is no FDIC or NCUA protection for IRA funds put into anything where you risk loss of your principal, even if the risk of loss is tiny. These agencies don’t insure IRA funds put into things like stock or bond mutual funds, individual stocks and bonds, annuities, government-issued securities or money market mutual funds.

    IRA Coverage

    The FDIC and NCUA insure deposit accounts held in a traditional IRA or Roth IRA. The FDIC also insures deposits in SEP-IRAs and SIMPLE-IRAs. The agencies treat all IRAs you own at a particular financial institution as a single account for insurance purposes. For instance, if you had $100,000 deposited in a Roth IRA account and $125,000 deposited in a traditional IRA account at the same institution, they would be treated as one IRA deposit account containing $225,000. Since this is under the $250,000 limit per institution, your funds are protected.

    Accounts Separated

    The FDIC and NCUA separate non-IRA accounts and IRA accounts you have at the same financial institution. If you have a savings account or certificate of deposit account that is not kept in your IRA, it will have its own separate $250,000 insurance limit. IRA deposit accounts and non-IRA deposit accounts fall into different insurance classifications so they are not counted together toward the insurance limit.

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    About the Author

    Herbert Kirchhoff has over 35 years experience as a newspaper and newsletter reporter, writer and editor, with 27 of those years spent on telecommunications industry policy issues. Kirchhoff has a B.A. in journalism from Rider University in New Jersey and has been published in the "Trenton (N.J.) Times" and in "Communications Daily" and State Telephone Regulation Report, Washington, D.C.

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