While that is what they’re legally required to insure. The reality is that even people with 10s of millions get fully covered. The FDIC has been covering 100% of retail bank accounts for a couple decades.
Most recently when the Silicon Valley Bank collapsed, accounts with over $60M were fully covered.
That’s because in those cases the FDIC receives the assets from the bank and distributes those. If they didn’t receive enough funds, individual depositors would not receive extra coverage from the FDIC
A quick google search showed that this happens to about 6% of accounts over the insured limit
Not legally guaranteed though, and it has to be a HUGE bank. Regional banks or Credit Unions will not do this.
The banks and credit unions aren’t the one’s covering the deposits. FDIC is for when the bank itself fails, when they can’t cover their customer’s deposits.
And yes it happens all the time for regional banks and credit unions. SVB was news only because they’re an odly large and important regional bank. But they were treated by FDIC like any other. No depositor at any retail bank in the US has lost their money due to a bank failure in 20+ years.
Sorry, I should have been more. ABOVE the 250k level is what they aren’t LEGALLY required to cover. Banks that do that and are FDIC insured are doing that on their own.
ABOVE the 250k level is what they aren’t LEGALLY required to cover.
Yes that’s just reiterating what I literally said originally.
There aren’t different tiers of FDIC insurance. The banks aren’t choosing to paying for extra coverage. The FDIC is a federal program. Yes the banks pay into it. It’s required by law that they do. But the FDIC decides on it’s own if it will cover more than $250k. And they have, for every bank collapse, no matter the size, at least since the late 90s.
If you have a million, you should be investing it, not letting it sit in a bank.
You’d have a million in assets, not a million in cash.
Cash is evaporating every moment it sits there (inflation)
You the borrow money using those assets as collateral to do more investing.
The profits from the investments goes to repaying the loan.
I can’t go in details but I’ve see this firsthand.
They do not ever have more than 100k sitting in a bank except temporarily.
Yes the FDIC coverage is per depositor, per insured bank, for each account type (e.g., single, joint, IRA). Multiple accounts of the same type at the same bank are added together.
Also a caveat to this is, what many people don’t realize is banks fail pretty often. Last year four banks had to be taken over by the FDIC.
Edit: I am still thinking 2024 was last year. It was four banks in 24, not sure about 25.
Yep. People tend to think of the big 5-10 names that are on every corner, but the FDIC insures over 4,000 banks in the US.
PDF warning: https://www.fdic.gov/quarterly-banking-profile/fdic-latest-industry-trends-december-2024.pdf
Just be poor, much easier than having lots of bank accounts.
“Bank managers hate you when you use this simple trick”
Yes
There is also something called an ICS account that will split money across thousands of banks
Good luck if the banking system collapses.
Yes. In fact that’s how banks and brokerages try to retain FDIC insurance with larger sums of money e.g. Fidelity’s sweep accounts are actually spread across many accounts under $250k each. See the Deposit Sweep Program info at https://www.fidelity.com/why-fidelity/safeguarding-your-accounts
I don’t have the money to test this, but I imagine that there are other insurances available for people with more than $250,000 in cash assets.
I’m thinking the people with this kind of money probably don’t use our riff-raff banks.
They’re not keeping a million sitting around in cash. Investment accounts have a separate insurance program
Not someone who has that kind of money, but people who have enough money to want it perpetually invested and growing (so they can periodically withdraw from it without impacting the base fund), throw it into an index or money market fund like those provided by the big 3 (Vanguard, Blackrock, State Street).
Although you will still need a bank regardless in your life for things like checking accounts and credit cards.
They use the same banks as us, they just have a VP’s direct cell number rather than talking to a run-of-the-mill teller during business hours.
JP Morgan didn’t get all their assets by exclusivity serving low net worth individuals.
Usually paid, this is federal minimum usually. So free by taxes.
You can use the EDIE calculator. Depends on how many beneficiaries too. Am in banking.
Welcome to the FDIC’s Electronic Deposit Insurance Estimator (EDIE) Attention mobile device users, recent visual enhancements have been implemented to improve your experience.
SUMMARY OF TRUST RULE CHANGE:
As of April 1, 2024, the maximum insurance coverage for a trust owner with five or more beneficiaries is $1,250,000 per owner for all trust accounts (including payable on death (POD)/in trust for (ITF) accounts, formal revocable trusts, and irrevocable trusts) held at the same bank. Depositors can name as many beneficiaries as they wish, however the coverage limit will not exceed $1,250,000 as of April 1, 2024. This coverage change applies to both existing and new trust accounts, for all deposit products, including CDs regardless of purchase or maturity date.
Most people who put more than 250k in a single bank in a single account type won’t be using the bank’s insurance for protection.
I use a credit Union and they offer the $250K limit and an additional $250k per beneficiary (person who gets your money if you die) on that account.
Wow you discovered mathematics
Most banks will up this to 500k if you add your spouse to the account.
