FDIC raising from limits $100K to $250K. Yay or Nay?

[Pitman]

I would like to hear the views on this proposal.



Personally I'm for the FDIC to raise its limits. I have close family members who at the moment are moving money from bank to bank, to keep their account under $100K. If or when it changes, it'll give the few Americans a big relief.

[Ima saver]

Well, I am for it too. I have my savings in 4 different banks to stay under the $100,000 limit. However, with interest added, one of my accounts is over the limit!

[MonkeyMama]

I wonder how long it has been at $100k? Factoring inflation, it is probably reasonable.

[boosami]

The current limit has been in place since 1980. IRAs are already insured by the FDIC at $250,000 (since 2005). Would that have to go up as well?

I believe the FDIC has currently over $60B in insurance funds. If raised to the proposed limit that number could be $150B+. Who's going to make up that $90B+ extra money?

Married folks and families can get around the limits within a bank by titling their accounts creatively. A family of four can easily insure $1.5M in deposits in one bank branch.

[simpletron]

the limit was increased from 40K to 100K in march, 1980. if you do CPI adjustments it should be 273,515.60 as of august of this year. the cpi adjusted limit has been higher than 250K since april, 2005. so it is about time, this happens.

[Ima saver]

Yes, you can have $200,000 fdic insured if you have joint accounts with your spouse.

[disneysteve]

the limit was increased from 40K to 100K in march, 1980. if you do CPI adjustments it should be 273,515.60 as of august of this year. the cpi adjusted limit has been higher than 250K since april, 2005. so it is about time, this happens.

I agree. It is long, long overdue. Like so many other things the government has done (IRA/Roth limits, AMT issues, etc.), they put them in place and somehow forget to index them to inflation. Remember, up until a few years ago, we could still only put $2,000/year into an IRA. A lot good that will do in building an adequate nest egg. Finally, in 2009, IRA contributions will begin getting adjusted for inflation.

[boosami]

$1.5M for a family of four, using creative titling:

$100,000 in your name
$100,000 in spouse's name
$200,000 joint account
$250,000 retirement - yours
$250,000 retirement - spouse's
$100,000 your name, revocable trust to spouse
$100,000 spouse's name, revocable trust to you
$200,000 your name, revocable trust to son & daughter
$200,000 spouse's name, revocable trust to son & daughter
---------
$1,500,000 insured at one single bank

[boosami]

You can also set up trusts for parents, siblings, and grandchildren.

A revocable trust remains in the account owner's control, but would be payable on death to the beneficiary.

[tripods68]

$1.5M for a family of four, using creative titling:

$100,000 in your name
$100,000 in spouse's name
$200,000 joint account
$250,000 retirement - yours
$250,000 retirement - spouse's
$100,000 your name, revocable trust to spouse
$100,000 spouse's name, revocable trust to you
$200,000 your name, revocable trust to son & daughter
$200,000 spouse's name, revocable trust to son & daughter
---------
$1,500,000 insured at one single bank

Your own account name + Joint account exceed $250K already. I don't think it can work. Have verified this with your bank?

Revocable trust to your name might work using a different tax id issued by the IRS. Gotta check...

[boosami]

Your own account name + Joint account exceed $250K already. I don't think it can work. Have verified this with your bank?

It absolutely works under the current FDIC rules. Joint accounts are insured separate from individual accounts because they are titled with two owners. The $250k limit only applies to IRA accounts.

Raising the account/IRA insurance to $250k/$500k would result in $3.5M of total coverage.

[SnoopyCool]

I was curious about this... how does it relate to the current crisis, or are they just changing it while simultaneously doing the bailout? Are they related?

[Broken Arrow]

A little late to the party, but just wanted to add that I too think it's long overdue. I think this is a nice little addition for banks, but will be especially beneficial to small business owners.

[boosami]

It was initially included in the bailout bill, but was not a part of the final bill that got voted down. They'll probably tack it onto a revised bill in hopes that will help it get enough votes to pass.

Raising FDIC limits won't do much in my opinion. Most people who need to get around it already have, and the majority of America is well under the $100k mark. It might restore a tiny bit of confidence in the banks, but it's not as much as you might think.

[boosami]

Example: When IndyMac failed only $500M was over and above FDIC coverage, out of $20B total. That means ~98% of the money was fully insured.