Insurance to increase for retirement accounts
Money you’ve socked away in certain retirement accounts will have more federal insurance protection at your bank and savings institution beginning April 1. Credit union depositors also will see an increase in the insurance limit for their retirement accounts.
Both the Federal Deposit Insurance Corp. and the National Credit Union Administration recently approved final rules to implement an increase in the amount of deposit insurance coverage to $250,000 from the current $100,000 on self-directed retirement accounts – primarily traditional and Roth IRAs (individual retirement accounts).
The increase in insurance coverage also covers self-directed Keogh accounts, 457 plan accounts for state government employees, and employer-sponsored accounts that are self-directed, primarily 401(k) accounts, according to a release by the FDIC. Self-directed means you control how and where the money is deposited.
The higher insurance rates are good because workers increasingly are being asked to save for their own retirements and many of them will want their savings protected by the government.
Under the new law, all deposits at the same credit union, insured bank or savings institution that are in the broad category of self-directed retirement accounts will be added together and insured up to $250,000.
Info available
For more information about rising insurance coverage for certain retirement accounts, go to the Federal Deposit Insurance Corp. Web site at www.fdic.gov, then click on the link that says “FDIC Consumer News Special Bulletin.” You also can call toll free, at (877) 275-3342, Monday through Friday from 7 a.m. to 7 p.m.
The increase does not cover other deposit accounts that an individual or a family may have in non-retirement accounts; that basic limit will remain at $100,000 per depositor, although much more coverage is possible if you open accounts in different ownership categories, such as single, joint and trust accounts.
Keep in mind that the FDIC insurance only protects deposit accounts, and does not cover investments. If you put money into a mutual fund sold to you by an FDIC-insured bank, those funds are not protected; the money is not insured.
Experienced investors know this but as more people begin to invest for the first time and/or invest with institutions they associate with deposit insurance, it’s important to make that distinction.