Did you roll your retirement account over from your workplace to your favorite bank or credit union to a retirement account? Do you have an IRA or Keough account at your bank or credit union? Is the amount in excess of $250,000? If so, did you know that the amount over $250,000 is not insured by either the FDIC or, in the case of credit unions, the NCUA?
No, it does NOT matter if you have your spouses name on the account as community property or with right of survivorship, nor how many beneficiaries are named on the account. According to the Federal insurers of these institutions, all retirement accounts have one thing in common and that is they have a $250,000 insured limit per person per institution. Period. End of story. You also have a limit of $100,000 per account you might have in the institution, so savings can be insured separately as can be checking, etc, but NOT retirement accounts. However, you can have a retirement account into which you contributed separately, as can your spouse and each will be insured separately up to the $250K amount, providing each is a fully separate account.
So, if you, personally, have three retirement accounts, and each has $150,000 in it, you stand to lose $200,000 if your bank or credit union folds. If you have one account and it has $500,000 in it you stand to lose $250,000 in one fell swoop in the same scenario. Not likely, but given the present economy, who wants to take that chance. My suggestion is to diversify and move money to credit unions or banks where the money will be insured. You might not make as much interest at another bank, but losing a few dollars in interest isn't nearly as bad as losing your lifes' savings!
I'm writing this because I have been misinformed, and I believe downright deceived, by people who are not the brightest bulbs on the tree at the San Diego County Credit Union. As late as yesterday, I was informed that accounts were covered fully and that the number of beneficiaries on the account increased the insurance on the account, so if you have four beneficiaries, you would automatically increase the insurance by $400K plus the amount already available to husband and spouse of $100K each for a total of $600K. HUH? None of that applies to anything, but it sure must have sounded good coming out of the storyteller at SDCCU so she went on to tell me more amazing stories to try and convince me all was fine in credit union land.
When I told her she was wrong and needed to get her facts straight, she finally went to ask a supervisor and returned agreeing reluctantly that I was correct; $250K is the limit. But then went on to tell me even though the money is uninsured and I could potentially lose it, the credit union is doing so well and has never had financial troubles. Wait a minute...this is MY Money and it's uninsured! People at Indymac bank might have heard the same thing and they're sitting without a bunch of their life's savings now!
Just as a side note, this same institution has been telling me for two years that the limit didn't apply to IRA's. It's a shame you have to get on the Internet, and research and print out materials to take to the bank to educate them about their job, to avoid being sacrificed in the event of a meltdown. What the hell happened to professionalism and knowledge in the banking industry where you could get a straight answer? Remember the saying "You can take that to the bank"? or "You can bank on it"? Better not use that one any more.
I am not assuming Chicken Little's position and screaming that the sky is falling. Far from it; I believe our financial system is secure. However, why would anyone want to keep their money in an institution where it is not insured? That's like buying a car and insuring it for half it's value and after the wreck only having the chassis but no engine because the insurance doesn't cover it all. Or buying a house and then insuring it for only part of it's value, like house insurance that doesn't cover the roof; after the loss you get great walls, carpet and furniture but no roof or ceilings.
In my humble opinion, unless you are willing to lose, you take precautionary steps to secure. Seems to work in combat as in finance. The stakes just are different.
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