Your savings and investments can take many forms, ranging from a readily accessible passbook savings account to a portfolio of stocks, bonds and real estate investment trusts. You might have all of your savings and investments, including your retirement accounts, with a single financial institution or divided among a number of institutions. How your IRA investments and CD investments are insured depends on which institution acts as your custodian and what kind of investments are in your individual retirement account.
Different kinds of IRA custodians offer different levels of federal insurance for your certificates of deposit and IRA investments. For example, the Federal Deposit Insurance Corporation insures member-bank CDs up to $250,000 per qualifying account, as of 2012. Credit union CDs are insured up to the same amount by the National Credit Union Administration. Your investments held by your stock brokerage firm are covered for up to $500,000 if a firm that is a member of the Securities Investors Protection Corporation goes under.
FDIC and NCUA coverage is available per depositor, per member institution, for each account-ownership category. Both agencies consider your IRA a separate ownership category from your other deposit accounts. For example, certificates of deposit held in your non-retirement account are insured separately from deposit investments, such as bank certificates of deposit, held in your IRA at the same bank. You could have up to $250,000 of insured CDs in your non-retirement account and another $250,000 in insurance on deposit investments in your bank IRA account.
Because there is no requirement for you to keep your IRA at the same institution as your savings account, it is possible to have an insured CD with your bank and your IRA with a insurance company, mutual fund company or brokerage firm. While your CD might be with an FDIC-insured bank, your IRA's custodian might not be insured by any federal agency.
Banks and credit unions may offer life insurance and mutual funds, while brokerage firms might offer certificates of deposits. However, not all financial products are insured by the FDIC or NCUA, even if they are sold through a member bank. For example, the FDIC insures your deposits, which includes your savings account, checking account and certificates of deposit. It does not insure stocks, bonds or mutual funds you hold in your IRA, even if the bank serves as your account custodian.
Mike Parker is a full-time writer, publisher and independent businessman. His background includes a career as an investments broker with such NYSE member firms as Edward Jones & Company, AG Edwards & Sons and Dean Witter. He helped launch DiscoverCard as one of the company's first merchant sales reps.