Your Money
Is Safe and Sound,
Despite Attack On America
by Robert K. Heady
Bank Rate Monitor
Our
country's financial markets remain as sound as a dollar, despite
the terrorists' horrific Sept. 11 attack on America.
Of that you can be
sure.
Despite the fact that
the attack destroyed key nerve centers of brokerage operations
at the World Trade Center in New York, and has spawned fears
of pushing the United States into a recession, your money
is safe.
Nowhere does this ring
more true than with the nation's 9,840 FDIC-insured banks and
thrifts, where your deposits are fully protected for up to $100,000
per person for an individual account, including principal and
interest, at the same institution. No one has ever lost a dime
at an FDIC-insured bank or thriftno one ever willand it's even
possible for a family of four to be insured for as much as $1.4
million.
Granted, it appears
Osama bin Laden and his despicable gang of evildoers may have
temporarily dented our ailing economy's recovery, but the terrorists
underestimated one thing: Amercia's enormous resiliency and resolve
when we're threatened, as with Pearl Harbor, and that includes
safeguarding our financial structure.
Within 24 hours after
the cowardly attack, Michael G. Oxley, D-Ohio, chairman of the
U.S. House's Committee on Financial Services, and John J. LaFalce,
D-N.Y., ranking committee member, issued a joint structure statement
assuring consumers, savers and investors that "our systems
remain fundamentally sound."
Plus, we've come a
long way since the 1990s, when 932 institutions folded after
the savings and loan debacle early in the decade. In 2000, seven
outfits went under, and thus far in 2001 only three outfits have
failed anyone with less than $100,000 on deposit got their money
back.
Let's review what FDIC
insurance does and doesn't do:
Fully protects your
savings, money market accounts, checking and CDs up to a total
of $100,000, including principal and interest. Example: If you
purchase a $95,000 CD earning 5 percent, all your funds are insured
($95,000 plus $4,750 in interest). If you buy a $100,000 CD,
the $5,000 in interest isn't covered. Because the FDIC maximum
is $100K, you should deposit anything above $95K in a second
FDIC-insured institution, and so on.
IRA accounts are insured
separately at the same bank, so it's possible to have both an
IRA and a regular saving account at the same outfit, with each
insured for up to $100,000.
Credit union accounts
are insured to $100K by the National Credit Union Administration
and not by the FDIC, but they're just as safe.
Federal insurance covers
not only individual accounts but also "joint" and "testamentary
revocable trust accounts." Theoretically, it's possible
for a family of four, by using those accounts, to insure up to
$1.4 million in deposits. Before you take this route, it's advisable
to contact a qualified financial planner. The procedure may appear
complicated, but it's fully explained on FDIC's Web site at www.fdic.gov.
Basically, it works as follows:
The
husband, wife, child No. 1 and child No. 2 open individual accounts
insured for $100,000 each. Total insurance: $400,000.
A combination of three
joint tenancy accounts each for $100,000 is opened as follows:
a) by the husband and wife. b) husband and one child, and c)
wife and other child. Total insurance: $400,000.
Six different testamentary
revocable trust accounts, each insured for $100K, are opened
by: a) the husband for his wife, b) wife for her husband, c)
husband for child No. 1 d) husband for child No. 2, e) wife for
child No. 1, and f) wife and child No. 2. Total insurance: $600,000.
The things that FDIC
insurance doesn't cover are:
- Non-deposit investment accounts such as stocks, mutual funds and annuities that may be sold by a bank or savings institution.
- Losses due to fire, theft or fraud, which are subject to other protections such as hazard and casualty insurance.
Yes,
pray for the victims of the attack on America and their families,
and talk to your children. But don't lose one minute of sleep
over the impact on the safety of your money by monsters like
bin Laden. The terrorists' days are numbered.
Editor's Note: Robert
K. Heady is the founding publisher of Bank Rate Monitor and is
the co-author of the book, "The Complete Idiot's Guide to
Managing Your Money." You can e-mail him at jrnl8888@aol.com.
His columns appear regularly in the Bull & Bear Financial
Report print version.
