FDIC Coverage Limits - Trying to understand max coverage in a single savings account

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zirconBH
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FDIC Coverage Limits - Trying to understand max coverage in a single savings account

Post by zirconBH » Wed Mar 18, 2020 3:20 pm

With everything melting down around us, I'm looking at moving money out of my Vanguard Federal Money Market Fund (VMFXX) sweep accounts, and some out of my total bond index funds and move these dollars into FDIC insured saving accounts for safety.

I'm trying to understand what are the FDIC insurance limits are... When I read the FDIC Deposit Insurance https://www.fdic.gov/deposit/deposits/faq.html I'm still not clear on what is the max dollar amount insured per bank.

Specifically I'm trying to understand what this means:

COVERAGE LIMITS
The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category.


Am I dense? :shock: I'm still struggling to understand fully what is the max coverage limits that I have in a single savings account.

My example use case: My FDIC bank savings account is held in a Living Trust, owned by my wife and I. The trust has 4 different beneficiaries who are all individual persons. So what is the max FDIC dollar insured? wife and I = 2x $250K=$500K and then 4x beneficiaries x $250K = $1M ?

Or is it safer having > $250K to open multiple accounts and/or even put money into multiple FDIC banks? :confused

fwellimort
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Re: FDIC Coverage Limits - Trying to understand max coverage in a single savings account

Post by fwellimort » Wed Mar 18, 2020 3:26 pm

250k per social security number per bank.

So if join account (2 people), $500k.
If 1 person, $250k per bank. If you have savings at Bank A with $250k and checkings at Bank A with $250k, you only get $250k.

Basically, $250k per bank per person.

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nisiprius
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Re: FDIC Coverage Limits - Trying to understand max coverage in a single savings account

Post by nisiprius » Wed Mar 18, 2020 3:30 pm

The FDIC has a tool, EDIE, mentioned in and linked from the page you found, at https://edie.fdic.gov . If you really want to be sure you understand, it's very worth going there and working through it. In the process of answering their questions you'll also see clearly what the issues are.
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Kevin M
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Re: FDIC Coverage Limits - Trying to understand max coverage in a single savings account

Post by Kevin M » Wed Mar 18, 2020 3:39 pm

zirconBH wrote:
Wed Mar 18, 2020 3:20 pm
My example use case: My FDIC bank savings account is held in a Living Trust, owned by my wife and I. The trust has 4 different beneficiaries who are all individual persons. So what is the max FDIC dollar insured? wife and I = 2x $250K=$500K and then 4x beneficiaries x $250K = $1M ?
Only the underlined bit. Revocable trust ownership category depends only on the number of beneficiaries, not number of owners. So you are covered up to $1M with four beneficiaries.

Per the FAQ you linked to:
Q: Can I have more than $250,000 of deposit insurance coverage at one FDIC-insured bank?

A: Yes. The FDIC insures deposits according to the ownership category in which the funds are insured and how the accounts are titled. The standard deposit insurance coverage limit is $250,000 per depositor, per FDIC-insured bank, per ownership category. Deposits held in different ownership categories are separately insured, up to at least $250,000, even if held at the same bank. For example, a revocable trust account (including living trusts and informal revocable trusts commonly referred to as payable on death (POD) accounts) with one owner naming three unique beneficiaries can be insured up to $750,000. See the Your Insured Deposit brochure for details.
The underlined part is similar to your situation--note that the one owner is not included to determine the coverage.

Also, if you click the link toward the end of the quote, you get more detailed info. Click on Your Insured Deposits link on that page: https://www.fdic.gov/deposit/deposits/b ... glish.html. Then scroll down to Ownership Categories, and for your case, click on Revocable Trust Accounts.

Kevin
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VeganBH
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Re: FDIC Coverage Limits - Trying to understand max coverage in a single savings account

Post by VeganBH » Wed Mar 18, 2020 4:40 pm

Also considering moving a significant amount of funds out of Vanguard Federal MM (default account, VMFXX), to our local BofA Branch.
Is this crazy to consider this move - or just prudent/possibly "safer"? We are on the cusp of retirement (or not).
Our "stay the course" philosophy is seriously being challenged.
Last edited by VeganBH on Wed Mar 18, 2020 5:41 pm, edited 1 time in total.
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Re: FDIC Coverage Limits - Trying to understand max coverage in a single savings account

Post by Kevin M » Wed Mar 18, 2020 4:52 pm

VeganBH wrote:
Wed Mar 18, 2020 4:40 pm
Also considering moving a significant amount of funds out of Vanguard Federal MM (default account, VMFXX), to our local BofA Branch.
Is this crazy to consider movinghis move - or just "safer"? We are on the cusp of retirement (or not).
Our "stay the course" philosophy is seriously being challenged.
I wouldn't worry too much about the safety of VMFXX, which is mostly government debt, and I assume your B of A account doesn't pay much more than 0%. A better option would be to transfer to an FDIC-insured account at an online bank that pays higher interest. Ally Bank currently pays 1.50% on savings, and even better would be a no-penalty CD at 1.55% for $25K minimum, since you lock the rate in for up to 11 months, but can withdraw it if necessary after seven days.

If you have $50K, you could exchange to VUSXX, which is even safer than VMFXX, as it is almost 100% Treasury Bills. If you pay state income tax, factor the state tax exemption into your taxable-equivalent yield. VMFXX also has a partial state tax exemption.

Kevin
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Re: FDIC Coverage Limits - Trying to understand max coverage in a single savings account

Post by VeganBH » Wed Mar 18, 2020 5:51 pm

Kevin M wrote:
Wed Mar 18, 2020 4:52 pm
VeganBH wrote:
Wed Mar 18, 2020 4:40 pm
Also considering moving a significant amount of funds out of Vanguard Federal MM (default account, VMFXX), to our local BofA Branch.
Is this crazy to consider movinghis move - or just "safer"? We are on the cusp of retirement (or not).
Our "stay the course" philosophy is seriously being challenged.
I wouldn't worry too much about the safety of VMFXX, which is mostly government debt, and I assume your B of A account doesn't pay much more than 0%. A better option would be to transfer to an FDIC-insured account at an online bank that pays higher interest. Ally Bank currently pays 1.50% on savings, and even better would be a no-penalty CD at 1.55% for $25K minimum, since you lock the rate in for up to 11 months, but can withdraw it if necessary after seven days.

If you have $50K, you could exchange to VUSXX, which is even safer than VMFXX, as it is almost 100% Treasury Bills. If you pay state income tax, factor the state tax exemption into your taxable-equivalent yield. VMFXX also has a partial state tax exemption.

Kevin
Very good information - thank you so much for these suggestions. I will look into all immediately. Yes, BofA pays ~0% - had no idea a 1.50% could be had at a bank savings account. Will be checking this out - as well as no-penalty CDs.

Will pass on the VUSXX - I can't handle trying to understand something new at this point. :annoyed
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Drerwski
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Re: FDIC Coverage Limits - Trying to understand max coverage in a single savings account

Post by Drerwski » Thu Mar 19, 2020 11:13 am

To help Bogleheads find the facts about FDIC coverage and other FDIC Rules, Regulations, and Law, follow the links below.
______________________________________________________________________________________________________________________________
Section 330 Deposit Insurance Coverage Sec. 330.1 to 330.101 <----Click Here

Sec.
330.1 Definitions.
330.2 Purpose.
330.3 General principles.
330.4 Continuation of separate deposit insurance after merger of insured depository institutions.
330.5 Recognition of deposit ownership and fiduciary relationships.
330.6 Single ownership accounts.
330.7 Accounts held by an agent, nominee, guardian, custodian or conservator.
330.8 Annuity contract accounts.
330.9 Joint ownership accounts.
330.10 Revocable trust accounts.
330.11 Accounts of a corporation, partnership or unincorporated association.
330.12 Accounts held by a depository institution as the trustee of an irrevocable trust.
330.13 Irrevocable trust accounts.
330.14 Retirement and other employee benefit plan accounts.
330.15 Accounts held by government depositors.
330.16 [Reserved]
330.101 Premiums.

______________________________________________________________________________________________________________________________
Looseleaf Service Location 2000, Law, Regulations, Related Acts Part 301 to 391<----Click Here

FDIC Law, Regulations, Related Acts is a compilation of banking-related material. It includes the FDIC Act, FDIC regulations, FDIC Advisory Opinions, FDIC Statements of Policy, and a selection of banking-related materials issued by other agencies. This publication is not intended to be comprehensive; if it does not include the material you are looking for, please consult the eCFR, the GPO, the Federal Register, or the promulgating agency's website. Incorporates CFR updates as of December 31, 2019

FDIC Law, Regulations, Related Acts is updated bimonthly. Each update includes a Bulletin which gives a summary of significant changes and additions included in the update. You may view the most recent Bulletin's Supplement highlights Here.
______________________________________________________________________________________________________________________________
Need help? The FDIC Call Center will direct your call. Toll-free numbers: 877-ASKFDIC (877-275-3342), TTY Toll Free number 1-800-877-8339
Hours of operation: (8:00 am - 8:00 pm ET Monday - Friday) (9:00 am - 5:00 pm ET Saturday-Sunday) (Excluding Federal Holidays)

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