Answers to Your Questions About FDIC Insurance

Answers to your questions about FDIC insurance.

Elizabeth Carlassare
3-minute read
Episode #35

Protect Your Roth IRA

And now for the next question; Adrianne in Delaware e-mailed me this:

“I just listened to your podcast about the FDIC. My Roth IRA account will be over the $250,000 limit for FDIC insurance in a few years, including, of course, the compound interest. What should I do? Can I take some money from my current bank, Bank X, and open a new Roth IRA at Bank Y? What do million-dollar celebrities and extremely successful business people do?”
First, determine how much of your IRA is actually invested in bank deposits. FDIC insurance applies to deposits, not investments. Only the portion of your retirement account in bank deposits, such as CDs and money market savings accounts, would be covered by FDIC insurance. FDIC insurance does not apply to money invested in stocks, bonds, mutual funds, life insurance, or annuities, even if you buy them at an FDIC-insured bank.

Most people keep the bulk of their retirement savings in investments that have the potential to earn a higher return than CDs. But let’s say, just for the purpose of illustration, that you’re retired and you like the predictability of CDs and keep a significant portion of your IRA in them. In this case, the CD investments in your IRA would be insured up to the $250,000 coverage limit, if your IRA were held at an FDIC-insured bank.

But let’s say you have more than $250,000 invested in CDs in your IRA and you want the entire amount to be insured. You could open a second IRA at another FDIC-insured bank and move enough of your retirement savings to the new IRA to limit the amount of your CD investments at each bank to less than $250,000.  Doing a direct transfer of funds between IRA custodians avoids income taxes, if applicable, and the 10% IRS penalty for early withdrawal, if you’re under age 59 ½.

Again, the $250,000 coverage limit for retirement accounts applies to cash deposits only, such as CDs and money market savings accounts. And, the coverage applies to some, but not all, types of retirement accounts. It applies to all types of IRAs, Keoghs, Section 457 deferred compensation plans for government employees, and employer-sponsored defined-contribution plans (such as 401(k)s). [[AdMiddle]

The same deposit insurance limits used by the FDIC, also apply to credit unions insured by the National Credit Union Association.

Thanks again for the questions!

As always, everyone’s situation is different, so be sure to consult a tax or financial advisor before making important financial decisions. This podcast is for educational purposes only and is not intended to be a substitute for seeking personalized, professional advice.

Cha-ching! That’s all for now, courtesy of Money Girl, your guide to a richer life.


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Money Girl is part of the Quick and Dirty Tips network. Check out the other great podcasts like Modern Manners Guy. This week he’s talking about the grammar and manners of using “can” versus “may”.

Related links:
·    Press Release: FDIC Insurance for Retirement Accounts Increased to $250,000

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