The Federal Deposit Insurance Corporation (FDIC) has been in the news recently as bank failures have made headlines. The FDIC is an independent agency created by Congress. It provides deposit insurance coverage for institutions such as banks, if the bank fails and does not have enough assets to pay off depositors. The FDIC insures deposits up to $250,000. You may wonder if your IRA is protected by the FDIC. Here are five facts you need to know.

  1. Not all IRAs are protected by FDIC insurance.

The FDIC only protects deposit accounts at FDIC-insured institutions. If your IRA is invested in deposits such as a checking account, a savings account, or a certificate of deposit (CD), it would be protected. However, if your IRA is invested in stocks, mutual funds, or annuity products, it would NOT be protected by FDIC insurance. This is true even if your IRA is held by an FDIC-insured institution.

  1. IRA deposits are insured separately at each institution.

If you have multiple IRAs at different banks, each of your IRAs is insured separately up to the $250,000 limit.

  1. Your IRAs are insured separately from other deposits.

If you have both IRA assets and other assets at the same bank, your IRA deposits are insured separately from other deposits you might have at the same institution. For example, if you have a $200,000 IRA and $200,000 in non-IRA CDs at the same bank, all your deposits are fully protected.

  1. Inherited IRA assets are also insured separately even if held at the same bank.

For example, if you inherit an IRA worth $250,000 from your mother which is invested in a CD and you also have a $50,000 in IRA deposits in a different CD at the same bank, both your inherited IRA funds and your own IRA funds are fully protected by FDIC insurance.

  1. Traditional and Roth IRA deposits are NOT insured separately.

For purposes of the $250,000 limit for IRAs, any traditional and Roth IRA deposits at the same institution are aggregated. If you have $150,000 deposited in a Roth IRA and $200,000 deposited in a traditional IRA at the same bank, only $250,000 of your $350,000 total IRA deposits at that bank is protected by FDIC insurance.

 

 

By Sarah Brenner, JD
Director of Retirement Education

Copyright © 2023, Ed Slott and Company, LLC Reprinted from The Slott Report, 2022, with permission. Ed Slott and Company, LLC takes no responsibility for the current accuracy of this article. Content posted in Ed Slott’s IRA Corner was developed and produced by Ed Slott & Co. to provide information on a topic that may be of interest. Ed Slott and Ed Slott & Co. are not affiliated with Ethos Capital Management, Inc. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.  The tax information provided is general in nature and should not be construed as legal or tax advice. Information is derived from sources deemed to be reliable. Always consult an attorney or tax professional regarding your specific legal, or tax situation. Tax rules and regulations are subject to change at any time. Ethos Capital Management, Inc. is a registered investment adviser. The firm only conducts business in states where it is properly registered or is excluded from registration requirements. Registration is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability.