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Deposit and Security insurance
With the recent bank runs and their subsequent failures I looked into FDIC and SIPC a little bit more. While I don’t have enough money in either to be above the limits I do one day hope to.
FIDC insures bank deposits up to 250k.
SIPC insures equities and cash in brokerage up to 500k.
So if you have a 750k or more in assets what do you do? Only keep 250k per bank, ie open savings accounts in multiple different banks. I know SOFI tries to get around this somewhat by using software to hold up 250k in different banks online up to another limit of maybe 2 mil.
But for me I’m more concerned about SIPC. How many retirees have above 500k in a single 401k or brokerage. If you have above 500k in stocks do you have more than one brokerage limiting the total held in each to less than the insured limit?
Does anyone here have that ‘problem’ and how do you handle it?
For FDIC, you can exceed $250,000 by titling accounts differently. Obviously trust is a major factor here but you can have up $250,000 in an account in just your name, and another $250,000 is an account with you and a partner listed as owners and another $250,000 in an account with you and a family relative listed as owners, and on and on (different family relative, friend, Trust, etc.). I believe SIPC is the same although titling an IRA or 401k other than yourself is difficult. Regular brokerages can be opened under different titles though to allow greater coverage.
For me, I do exceed the SIPC limits so I have brokerages at different banks. I don't obsess over it though if I start going over $500,000 because I'm with massive, too-big-to-fail banks. If they go under, me losing my retirement funds are the least of my worries since the global economy with be kaput.
@interrobangbros I agree with not obsessing if you’re over by marginal amounts. I was mainly asking if for instance you have 2 mil in stocks. You don’t want the whole amount in one account in one brokerage/bank.
Bc right now I’m under the limits and have one savings account and one brokerage account.
I love the idea with the multiple named accounts (adding my wife or kids name to an account). I’ll confirm with my brokerage that each differently named account gets separate SIPC coverage.
Thanks.
@rpinvestments Just googled and SIPC website confirms:
"SIPC protection of customers with multiple accounts is determined by "separate capacity." Each separate capacity is protected up to $500,000 for securities and cash (including a $250,000 limit for cash only). Accounts held in the same capacity are combined for purposes of the SIPC protection limits.
Examples of separate capacities are:
- individual account;
- joint account;
- an account for a corporation;
- an account for a trust created under state law;
- an individual retirement account;
- a Roth individual retirement account;
- an account held by an executor for an estate; and
- an account held by a guardian for a ward or minor."
@interrobangbros thanks for your help. I confirmed with TD Ameritrade about SIPC. I opened a new joint investment account with my wife and I on it and this is covered with separate 500k SIPC insurance.
Already have an account?