This week’s theme on the Retirement Quick Tips Podcast is: Why Banks Are Going Bust & What To Do About It

Today, I’m talking about how to protect yourself against bank failures.

The most obvious way to protect yourself against bank failures, is to make sure your cash & savings account holdings at the bank are fully covered by FDIC insurance.

The problem is that if you have a lot of cash that exceeds the FDIC coverage limits, you could leave yourself exposed, and if your cash far exceeds FDIC coverage limits, it could be too cumbersome to spread your money around enough to maintain full coverage amounts with different banks, so people just don’t do that, especially with the 2008 financial crisis getting dimmer and dimmer. Up until early March, most people and almost certainly the depositors at SVB, many with millions of dollars sitting exposed and unprotected by FDIC, never considered that they might lose their deposits. But how quickly things change, so let’s break down the FDIC coverage limits so you can protect yourself 

The standard FDIC insurance amount is $250,000 per depositor, per insured bank. So if you’re married and have a Joint bank account, your assets there are insured up to $500,000. Anything under that amount is fully insured. Any cash or savings with that institution above that amount are uninsured. 

There are some other nuanced rules for other types of accounts and entities, like trust accounts, but applying the general rule of $250,000 in coverage per depositor per bank is going to be applicable in most cases. 

So if you have a lot of cash or savings with your bank in excess of this amount, the prudent thing to do is to spread your deposits among enough banks to always maintain the coverage limits. 

[Note - you don’t have to do this with all of your investments, keeping $250k at all financial institutions - doesn’t apply to investments, since those assets aren’t on the balance sheet of the financial institution. SIPC protections & additional insurance which will most often be fully insured and protected, and risk of investment itself]. 

That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the Retirement Quick Tips podcast.    

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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance