FDIC Insurance Limits Raised for Retirment Accounts

If you have done a good job of socking away money for retirement, the FDIC has good news for you. For the first time in more than 25 years, federal deposit insurance coverage has been raised, for certain types of retirement accounts. As of April 1st, FDIC deposit insurance coverage will be raised to $250,000 (up from $100,000) for certain retirement accounts held at banks or savings institutions.

Before you get too excited, keep in mind that this boost in coverage does not protect you if you lose money by investing in mutual funds, stocks, bonds, life insurance policies, or annuities at an FDIC-insured financial institution. After all, FDIC insurance is designed to protect against bank failure, not investment risk. But if you hold deposit accounts (certificates of deposit, for example) in traditional or Roth IRA's at a covered institution, then your funds would be insured against bank failure up to $250,000.

Other types of retirement accounts covered by the increase include Keogh accounts, "457 Plan" accounts for state government employees, and employer-sponsored "defined contribution plan" accounts that are self-directed, which are primarily 401(k) accounts. The increased limits also apply to certain retirement accounts at credit unions insured by the National Credit Union Administration (NCUA).

The current FDIC insurance limit for non-retirement accounts is generally $100,000, but there is a variety of ways to get more coverage, such as holding a personal account, business account and an account jointly with another person -- each of which may be covered up to $100,000. You can learn more about this change and FDIC insurance basics in this bulletin (link) on the FDIC website.