Does FDIC Insurance Offer Protection For Your Retirement?
If you are looking to take advantage of a retirement account at your local bank, how much protection do your really have in case the bank runs out of money? The purpose of this article is to define the FDIC, what it actually protects, the faults with the FDIC, and the solution for safe retirement investments.
What is the FDIC?
The Federal Deposit Insurance Corporation (FDIC) was formed as a result of the numerous bank failures during the Great Depression. The FDIC is a US government corporation created by the Glass-Steagall act of 1933. It provides protection for bank deposits of member banks.
How Much does FDIC Insurance Cover?
The current limit is $250,000 per depositor, but does not limit accounts at different banks. So, you could potentially keep $250,000 in three separate bank accounts for a total of $750,000 of FDIC insured deposits. There is really no limit to this, you could have a hundred different accounts insured for
$250,000 apiece for a total of $10 million.
What to do, if you have more than $250,000 to deposit??
The obvious thing to do is to hold accounts under the $250,000 FDIC limit in separate banks. The convenient alternative to this would be to open different accounts at the same institution. This is a limited solution, but can be adequately set up in the following ways:
Account Protection
* Individual Accounts $250,000 maximum FDIC insurance for all combined accounts.
Combination checking accounts, savings accounts, and CDs cannot exceed the $250,000 FDIC limit.
* Retirement Accounts $250,000 maximum insurance for all combined retirement accounts. This could include IRA and other retirement accounts.
* Revocable Living Trust (Testamentary) can be set up, providing $250,000 of FDIC protection per qualified beneficiary.
* Joint Account A married couple for example could set up a joint account that would be insured for up to $500,000 (2 x $250,000* FDIC limit).
The Problem
The concern most American have is whether or not the FDIC has enough money to pay everyone if an awful calamity should occur. While our government has not been shy about printing money when needed, it may take years to get your money in the event of bank failure.
Regarding retirement accounts, you are protected up to $250,000 for your IRA. To best protect yourself, it is recommended that you have multiple IRAs at different banks that don’t exceed $250,000. But isn’t the point to grow your IRA account as large as possible to take advantage of the interest rates?
As of the summer of 2010, the average IRA returns offered by banks is between 1.5-3%. Even at 3% interest, you won’t grow your retirement accounts very quickly. Given the lack of protection and low interest rates, using banks to grow your IRA account is not a smart way to grow your retirement account.
The Solution
The solution is to invest your retirement account in a Discounted Diversified Note System that offers you a fixed interest rate. DDNS is a performing mortgage that you can buy at a discount which pays a high fixed interest rate that is similar to a bank CD or an Annuity in that you invest money pays a guaranteed fixed interest rate. It is better than a CD or Annuity in that DDNS’s offer a higher interest rates than CD, TBills, or Mutual Funds without all the money gobbling fees. While banks give you an insurance policy in the form of an FDIC certificate to secure your deposits, DDNS accounts provide you with collateral in the form of real hard assets, i.e., real estate. Unlike the stock market, you can accurately predict what your retirement account will be worth in ten years!
Conventional Wisdom Vs. Common Sense
Conventional Wisdom
* Put your money where it makes a very low interest rate but it’s guaranteed.
* Leave it there even though it’s losing value.
Common Sense
* Put your money where it gets a high guaranteed interest rate
* Put your money here it is backed by collateral
Getting Started
The safest way to plan your retirement is to have control of your own money and invest in a program with a fixed interest rate is. Without being able to accurately determine your future value, how could anyone plan for their retirement?
ddns
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