By Eric Reich
Ever since the collapse of Silicon Valley Bank, investors are asking could this happen to my bank? Is my money safe? The causes of the failures of Silicon Valley Bank as well as Signature Bank are completely outside of the scope of “normal banks”. The former focused on venture capital for tech start-ups, and the latter was a primary lender to the crypto industry. That said, just the mere mention of a bank failure takes us back to 2008 in our minds, or worse yet, 1929 and the Great Depression. Let me start off by saying that yes, your bank is highly likely to be safe. By that I mean extremely likely. But, if you are still concerned about what happens if your bank were to be in trouble, I thought this week we would cover FDIC insurance, what it is, are you protected, and how to increase that protection.
The Federal Deposit Insurance Corporation or FDIC insures depositors up to $250,000 per depositor. This means that spouses can have $250,000 in each of their names for a total of $500,000 of FDIC coverage. If they have a business, then they can add another $250,000 in the name of the business too. FDIC covers checking, savings, money markets, CDs, etc. It does not cover securities such as stocks, bonds, mutual funds, ETFs etc. Those investments are covered under the Securities Investors Protect Corporation or SIPC.
So how do I make sure my assets are safe if I have more than $250,000 in cash?
- If you’re married, split the funds into each spouse’s name to increase coverage to $500,000.
- Use investment accounts to add and additional $500,000 ($250,000 cash) of protection through SIPC.
- Cash management accounts at brokerages can sweep deposits across multiple banks while still maintaining reporting through the one account.
- Ask your bank if they participate with the IntraFi network which deposits the excess funds into different network banks each providing an additional $250,000 of FDIC insurance. This is known as a CDARS or Certificate of Deposit Account Registry Service.
- If your bank isn’t an IntraFi affiliate, then deposit $250,000 into another bank since deposits are insured per depositor, per institution.
- Add revocable trusts which provide another $250,000 per depositor per beneficiary.
- Credit unions have their own organization known as National Credit Union Association (NCUA) which provides their own insurance for up to $250,000 per depositor per credit union per account ownership category.
- See if your bank is a member of the Deposit Insurance Fund (DIF) which covers deposits over the $250,000 FDIC limit.
As you can see, there are ways to protect literally millions of dollars though different avenues. My biggest piece of advice however is to simply not panic. The recent events are limited, isolated events and should not be viewed as something that should spread like a contagion. While we could see a rare case here or there, most likely these will be due to similar extenuating circumstances like Silicon Valley or Signature Bank.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Reich Asset Management, LLC is not affiliated with Kestra IS or Kestra AS. The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. To view form CRS visit https://bit.ly/KF-Disclosures.
Eric is President and founder of Reich Asset Management, LLC. He relies on his 25 years of experience to help clients have an enjoyable retirement. He is a
Certified Financial Planner™ and Certified Investment Management AnalystSM (CIMA®) and has earned his Chartered Life Underwriter® (CLU®) and Chartered Financial Consultant® (ChFC®) designations. A lifelong resident of Cape May County, Eric resides in Seaville, NJ with his wife Chrissy and their sons ,CJ and Cooper, and daughter Riley.
