How FDIC and SIPC Insurance Protects Your IRA
During 2008 fears spread about the extent of protection for IRA accounts, and with good cause. Banks and financial institutions have outright failed and merged or have switched to become commercial banks to protect capital bases, including some big ones (Goldman Sachs, Citigroup, Morgan Stanley, Washington Mutual, AIG, Lehman, Fannie Mae, Freddie Mac, Citizens Bank, subsidiary of Royal Bank of Scotland, and Merrill Lynch).
FDIC Insurance
Retirement accounts in banks are insured for up to $250,000 per individual. This includes all types of IRAs, ROTH IRAs, Simplified Employee Pension Plans (SEPs), self-directed Keogh plans, 457 plan accounts for government employees, self-directed 401(k) plans, Savings Incentive Match Plans for Employees (SIMPLEs), and 401(k) SIMPLE plans.
All like accounts for a certain individual are combined to determine the coverage. For example, if John Doe has a CD for $150,000 and an IRA for $250,000, John has full coverage because the CD and the IRA are different types of accounts. But if the $150,000 CD was in a SEP instead, then John would have uninsured risk of $150,000 because the IRA and SEP are similar accounts.
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