FDIC insurance limits only temporary

[tallyho8]

I don't know how many of you realize that the new $250,000 FDIC insurance on your bank accounts is only temporary and will revert back to $100,000 at the end of 2009.

I didn't know it and my banker didn't tell me. With stocks freefalling, I decided to put $250,000 of my retirement fund in a 5 year CD that had a good rate of 5 1/2%. Now I just found out that most of it won't be insured after 1-1-2010. And I can't take the money back out the CD to reinvest somewhere else without paying a huge penalty. Naturally, this is one of the big multi-national superbanks and not a local bank that might admit they failed to tell me their insurance was only temporary and make allowances to help me out. They won't even let me change the account to a two party one which would be insured to $200,000.

I usually keep up with the news fairly well and when they raised the limits to $250,000 I don't remember anyone saying that it was only temporary, but I could have overlooked it in the newspaper. It seems like the banks should be required to tell you this when they issue multi-year CDs.

Now I feel like it would have been safer in the stock market or even if I went to the racetrack with it.

Just wanted to let y'all know in case any of you have a quarter-mil and are thinking about doing the same thing. Suggestions?

 

[ultrarunner]

The banks around here have signs at the teller windows noting the increased insurance is only through 2009.

I agree that the media didn't to a good job of getting the information out.

Just curious, what does the paper work for your CD say?

 

[SnowRidge]

If you look at typical stock and mutual fund offerings, they all have a prominent disclaimer that says they are not insured by the federal government. I would think there should have been a similar disclaimer in your CD's case, which clearly stated that the funds would not be fully insured by the federal government.

I think I would at least consider filing a complaint with the FDIC. I would also try and put some heat under the bank by going to the local media.

 

[tallyho8]

Though this is not the bank that I have the aforementioned account in, this is the typical advertisement about their FDIC insured accounts. Nowhere does it mention that the $250,000 coverage is only temporary.
ING DIRECT USA - Frequently Asked Questions

 

[schmism]

Is only temporary today.

but whos to say they dont re-up the limit in 6 months or a year or tomorrow?

there are a ton of rules that that the gov't put in place with sunsets and they opt to keep them permanent.

on another note.... your retirement account was a mutual fund? I cant imagine loosing 30% of the value of my "invested" retirement account and then deciding to sell them to cash them out and put it in a CD.

Talk about a capital loss. On the upshot with a capital loss that big, you shouldn't have to worry about taxes this year.

So Ill go out on a limb and guess that either
1) you received really really poor investment advice, to the point that the person advising you didnt know that the increase in FDIC insurance is only temporary (which is hard to comprehend)

or

2) you didnt consult anyone in the first place in which case you only have yourself to blame.

 

[toy]

Tallyho8; I knew about that and started to mention it, sorry I didn't. Something that bothered me about it is that I was under the assumption that a fund was set aside ahead of time to cover times of bank failures. If that is the case you know that the money to cover the extra 150000 hasn't been set aside since the economy is in the toilet so , as the banks go under the pay out to each bank would be 2 1/2 times what it would be [I know that would be only for those that had more than the 100,000 previous limit ]. The first banks would soon deplete the money that is set aside and then without printing more money the fdic would be broke. That might not be the case but it was something that concerned me. I had a friend that about eight years ago one of the banks that he used went under because of embezzlement he lost a huge amount of money but he recouped a percentage, but with today's economy I wouldn't bet on much of a recoup if the bank went under now.

 

[Sigarms]

Correct me if I'm wrong, but no matter what amount the bank is insured for, dosen't the bank by law have up to two years to get your money to you if need be?

I only mention this because I'm not sure about the rest of you, but what cash I have in general accounts at the bank, taking up to two years getting me that money if I needed it would hurt.

 

[tallyho8]

on another note.... your retirement account was a mutual fund? I cant imagine loosing 30% of the value of my "invested" retirement account and then deciding to sell them to cash them out and put it in a CD.

Talk about a capital loss. On the upshot with a capital loss that big, you shouldn't have to worry about taxes this year.

So Ill go out on a limb and guess that either
1) you received really really poor investment advice, to the point that the person advising you didnt know that the increase in FDIC insurance is only temporary (which is hard to comprehend)

or

2) you didnt consult anyone in the first place in which case you only have yourself to blame.

No, my retirement fund was not in a mutual fund. I have privately invested my money in different ways over the years, ways that I have some knowledge of, and been fortunant enough to have always profited from these investments. I don't pay others or depend on others to tell me what to do with my money as I feel I have adequate knowledge to handle these matters myself. My personal investment fund has grown 4000% in the last 30 years and I am quite proud of my methods and happy to take the blame.

This last CD is the first time that I have ever felt that I did not research a deal well enough in advance and have money at risk.

If I felt that I would need the money anytime soon I would not have locked it in for 5 years.

 

[JB4310]

No I didn't know about the term limit either, they are so quick to inform us that our money is safe but no mention of for how long. Isn't that a real confidence booster.
If I were you I would make a huge stink, you put that amount of money there to be safe and you locked it in for 5 years now more than 3/5's of your money will not be FDIC insured after the sunset of the higher coverage.

Your not gonna change the policy but maybe could get them to wave any early withdrawal penalties if you decide to remove any of the money after the end of 2009.
JB.

 

[LBrown59]

The Government don't insure these funds to begin with .
The FDIC is a small private insurance co.
They only have enough assets to cover a very small percentage of these funds.
Seems to me it's only something like one half of one percent.
L . B .