What to Know About Increased FDIC Insurance for Retirement Accounts
If you're a long-term saver who's worried about your retirement accounts, this is good news for you. In an effort to "help more Americans achieve the dream of long-term financial security," the Federal Deposit Insurance Corporation (FDIC) has announced that they will be increasing their insurance coverage for retirement accounts.
In order to help clarify how this change will affect you as a consumer, we've put together some FAQs on what this update means for your savings and financial security.
What Accounts will Be Affected?
The new FDIC insurance coverage limits will be in effect for retirement accounts that already had deposit insurance coverage and for a six-month period thereafter. If you have questions regarding the status of your account, call the toll-free number on the back of your bank or credit union statement and ask to speak with a customer service representative.
What's the Current Maximum Amount of Insurance per Account? What Will the New Maximum be?
Currently, retirement accounts are insured up to $250,000. This limit is the same whether you're self-employed or working as an employee. The new FDIC insurance limit is expected to be $250,000 times six, which is $1,500,000.
How Does This Affect My Account Balance?
If you have a retirement account that is already insured by the FDIC and you're enrolled in Medicare or Medicaid, then your maximum deposit amount will be increased to $250,000 times six. This means that the total balance of your retirement account will be insured at $1,500,000. Additionally, if you are at least 62 years old and have not yet retired or plan to retire within the next 12 months — and if your employer offers a traditional pension plan — then there is no limit on how much of your money can be deposited into retirement accounts.
What if I Don't Plan to Retire?
If you're not planning on retiring anytime soon and you have a retirement account, the maximum amount of money that can be deposited in your account will be $250,000 times six. This means that you'll have $1,500,000 insured under your retirement account regardless of how much money you put in.
When Will the New Limits Be Effective?
The new FDIC insurance coverage limits will become effective on June 1st of this year and will last until December 31st of 2016. You can also expect to see notices from your bank or credit union in the next month or two about this change.
Does the Insurance Coverage Change Follow IBR or Other Pre-Retirement Distributions?
No. The new FDIC insurance limits are not being increased to follow the Internal Revenue Code (IRC) minimum distribution requirements. The new insurance limits will apply for every account, regardless of whether or not an individual is subject to the IRC.
What if I Don't Plan to Deposit All of My Money in Retirement Accounts? Will This Change Impact Me?
The new FDIC insurance coverage limit will be calculated by taking the total amount of deposits and dividing it by six. This means that if you only have $100,000 in your retirement account, the insurance coverage limit would be $1,000,000. If you thought that your retirement account could be insured at $250,000 times six — and only decided to deposit $100,000 of your money — then the insurance coverage limit on this account will be reduced to $1,500,000.
If this sounds confusing or if you've received notice about this change recently and are still unclear about how it will affect you personally, consider speaking with a trusted financial advisor who can help answer any questions that you have. You can contact us online anytime at http://www.chenilleslawoffice.com/contact-us.html , or you can give our firm a call at (951) 661-1002.
Posted by Calvin Thomas, Attorney at Law at 12:00 AM
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Written by Calvin Thomas | May 19, 2015
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