Money | 09/17/2008 9:55 am

Is My Money Safe? Three Ways to Check if Your Money Is Safe With the FDIC, SIPC and State Insurance Guarantees

By The Staff at wowOwow.com

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The dramatic events on Wall Street are making us on Main Street nervous about the safety of our money. Is my savings account safe? What about my investment accounts? What about my IRA account? Who administers my 401-K? And what about my annuity with AIG? Or my life-insurance plan with one of the other insurance companies?

In other words, "Is my money safe?"

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Consumers need to take control and find out if their money is safe. Here are a few tips on what you can do in these tumultuous financial times to educate yourself:

SAVINGS: Check to see whether your bank or savings association is FDIC-insured by calling 877-275-3342 or using the agency’s online "Bank Find" tool. Small businesses, in particular, which often keep large deposits in banks, should check to see if their deposits are above the insurance limits.

The Federal Deposit Insurance Corporation (FDIC), an independent agency of the U.S. government that protects depositors against the loss of their insured deposits if an FDIC-insured bank or savings association fails, offers information on your insured deposits. You can also read the FDIC insurance basics here.

If your money at one FDIC-insured bank or savings association totals $100,000 or less, your deposits are fully insured. Someone can have more than $100,000 at one insured bank or savings association and still be fully insured provided the accounts meet certain requirements.

If your deposits exceed the insurance limits, spread your money around to a few different banks. You may also want to open accounts in the names of different family members.

You can use the FDIC’s Certificate of Deposit Account Registry Service, or CDARS, which splits deposits into chunks under the $100,000 insurance limit and funnels the money out to 2,000 banks in the network. Only banks considered "well capitalized" by the FDIC are included.

INVESTMENTS: Both the bankrupt Lehman Brothers and the just-acquired Merrill Lynch are brokerage firms. What happens to your money when your investment house is in trouble? Visit the website of the Securities Investor Protection Corporation (SIPC), which maintains a special reserve fund authorized by Congress to help investors at failed brokerage firms. The SIPC has an “Investor’s Guide to Brokerage Firm Liquidations: What You Need to Know … and Do.”

Check if your broker is an SIPC member. Nearly all brokerages are but if yours isn’t, consider moving to a more-established firm. Make sure your advisers are working with SIPC members, too.

Lehman Brothers participates in the SIPC. The SIPC’s website says it protects “the cash and securities – such as stocks and bonds – held by a customer at a financially troubled brokerage firm."

INSURANCE: Is my insurance money safe? What about my annuity and life-insurance policy if my insurance company gets in trouble? Insurance companies are insured by the individual state where the policy was written, so there are 50 different answers to this question. Every state now offers at least $100,000 in cash for annuities and $300,000 in death benefits. In the event a consumer has a larger policy than the state guarantees, they become a creditor for the difference. The National Conference of Insurance Guaranty Funds has a website with information on these rules. You can also search "<name of your state> insurance guaranty."

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66 Reader Comments (so far…) Sign In or Register to comment

I don’t endorse panicking, but preparedness, Fran. Thanks for your thoughts.

By James the Game on 09/18/2008 8:51 am

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Thanks. The article briefly touched on an important issue in the mortgage/housing downfall, so far as I can tell, although you have way more real estate knowledge than I do. I know that banks bundle these mortgages and sell them to the secondary market. And that investors were buying a lot of homes and selling them off at a higher price without ever having even lived in them, creating kind of a false floor that eventually collapsed. That’s my rudimentary take on that aspect of it. I’ve been listening to NPR, the TV & cable networks, et al., and a recurring theme seems to be that we’ve gone where no man/woman has gone before, and several of the gurus have come right out and said, “This does have the potential to be as bad as 1929.” I don’t have enough expertise to tell you if it could be as bad as burned pizza. But even the so-called experts say they have no idea. That concerns me greatly. No cause to panic, but no reason to splurge right now, either.

By James the Game on 09/19/2008 2:23 am

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Actually, James, the sub-prime mortgage business was the straw that broke the camels’ back. Read about the derivatives markets. What is scary is what this is going to cost us over the long haul. That is one reason I think it is insane to promise permanent tax reductions, because those reductions are towards the verypeople that got us into this mess. What they are shelling out to shore up the market….god, can you imagine what we could have done with it in regards to health care or infrastructure? A shame….and, don’t fool yourself, this is not over.

By Diana T on 09/19/2008 4:20 pm

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This is True, believe it!!

By Juanita Ward on 09/17/2008 2:11 pm

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Indy Mac customers got their money in about 3 weeks. There haven’t been enough failures to calculate a meaningful average, but FDIC is pretty good about comparing claims to bank records and paying to properly identified depositors. Their are possible delays with accounts (like Living Trusts with deceased trustees, etc) that may take extra time because of their complexity.

By K O on 09/17/2008 10:01 am

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Hi Kitty, I’d be interested in your opinion of the 6 solutions proposed by Joseph Stiglitz, the Nobel Prize winner in Economics who teaches at Columbia University. He’s proposing setting up commissions and reform laws as a first step. Of course the horse is already out of the barn, so he’s looking at prevention steps for the future. Still, I would like to know if you agree with him. Thanks, mo

By Maurine H on 09/17/2008 11:17 am

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Hi Maurine, I’m not familiar with his proposal, but would be happy to review it, if you could provide a link. I was impressed with Larry Summers on Charlie Rose’s show the other night. His proposal was: 1) economic stimulus via public investment at the state & local level and up, to include hiring unemployed to keep income steady and thereby stabilize asset prices; 2) systematic containment of deleveraging (which is a economist’s way of saying lowering debt levels in an orderly manner) by infusion of capital, removing unpricable assets from balance sheets, and providing capital for buyers of those assets; 3) overhaul of regulatory system with an emphasis on transparency and working in both the public and corporate interest. The latter was a complex strategy invoving increased communication with G-8 and a proactive stance in order to deal with developing problems. He’s not a popular guy, but I think he’s got it about right. If this sounds familiar, it’s because he’s an advisor to Obama, and a lot of these ideas are included in Obama’s economic policy. Will wait for your link.

By K O on 09/17/2008 11:31 am

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Hi Kitty - Here’s the link: http://www.cnn.com/2008/POLITICS/09/17/stiglitz.crisis/index.html Just read the article this morning on-line. As for Larry Summers, I thought he was definitely miscast as the President of Harvard, but he seems to have a handle on economic issues. I’m sorry I missed Charlie’s interview with him.

By Maurine H on 09/17/2008 12:32 pm

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Hi Maurine, I’m going to answer you further down on the page, so we won’t be getting into that tiny column thing.

By K O on 09/17/2008 12:46 pm

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Kitty - thanks for the information. My bank is one the media and stock market says is in trouble. The bank says no. My concern is they are much larger than Indy Mac. Just wondering if the FDIC could cover a large bank failing. Agree with you about the depression - people love to say the sky is falling.

By Barbara Taylor on 09/17/2008 11:32 am

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Hi Barbara, If your bank, like mine, is Washington Mutual, here is a portion of a press release from S&P yesterday “Washington Mutual’s credit has been lowered to BB- by S&P, with the following accompanying statement, ‘Increasing market turmoil and the related impact from managing its concentrated mortgage franchise in this troubled housing and credit cycle led to the downgrade. It increasingly appears that market conditions could overtake credit fundamentals and leave the company with greatly diminished financial flexibility. Washington Mutual nevertheless has “adequate capital positions from a regulatory perspective, with a stable deposit base. Last week, the thrift said retail deposits as of August 31 were ‘essentially unchanged’ from $143.6 billion at the start of the year.’ That portion of the statement “It increasingly appears that market conditions could overtake credit fundamentals and leave the company with greatly diminished financial flexibility,” means that if panicky investors continue to dump the stock, the market may drive WaMu out of business regardless of its financial viability. That’s one of the reasons it just fries me when James and Frank continually post these “doomsday” predictions. As a Wall St. veteran, I’m used to taking flak from guys, but I never thought I’d run into it on a site for women over 40.

By K O on 09/17/2008 12:16 pm

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’ I never thought I’d run into it on a site for women over 40’ That’s because they are men on a site directed more towards women over 40. Never understood the enjoyment they receive from being on a woman’s site. But it is nice to see another viewpoint, if it’s not about doomsday. Yes, I’m with WAMU. Never understood why people panicked in the market over little things. Except now it’s not so little. I just feel I should take out what little savings I have right now. I’d still use the bank for direct deposit and paying bills.

By Barbara Taylor on 09/17/2008 12:43 pm

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Uh WAMU has just been put up for auction—now how’s you ideas about what’s happening?

By Frank Peterson on 09/17/2008 5:10 pm

And I’ve just been crowned Queen of the Universe, bunnies are running the country of Afghanistan and cranberries have been found to cause deafness. Oh, and Frank has no f-ing idea what he’s talking about.

By K O on 09/17/2008 5:42 pm