How FDIC insurance works

The FDIC insures $100,000. That's a good rule of thumb to keep in mind, but it can be more complicated. The rules have changed to keep up with the times.

Different types of accounts are insured separately from one another. For instance, many workers who change jobs take their retirement money out of their old employers 401Ks and put it in a bank IRA. The FDIC understands that and insures most qualifying retirement accounts up to $250,000.

Accounts held by a single individual savings, checking, CDs and the like are all added up and insured to $100,000. That's beyond the retirement account insurance.

Joint accounts are yet a different category. Deposits in them are insured up to $100,000 for each depositor.

So if you have $250,000 in a retirement account, $100,000 spread over several individual accounts and another $100,000 as your part of a joint account, FDIC insurance will cover the whole $450,000 -- and that's for every bank you use.

So what's the catch? Well, there are three. Because of all of these difficulties banks will begin merging. If you have accounts two banks that merge, your coverage drops to the one bank amount. Secondly, remember we are talking different banks, not different branches of the same bank. And finally, stocks and bonds are not insured by the FDIC, only savings accounts, CDs and other covered banking options.

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