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What’s changed, what hasn’t, and how to get more information:
You work hard and save money to ensure that one day you will have a
comfortable retirement. Today, people live longer and spend more
years in retirement than ever before, so preparing financially and
keeping your nest egg secure is crucial.
The good news is that people now have increased protection on their retirement
savings accounts at banks and credit unions. For the first time in 25 years,
Congress has raised the limit on federal deposit and share insurance coverage,
which protects against retirement savings loss if a bank or credit union
fails. However, the higher insurance limit only applies to certain retirement
accounts that people have at banks and savings associations insured by the
Federal Deposit Insurance Corporation (FDIC) and at credit unions insured by
the National Credit Union Administration (NCUA).
NCUA wants credit union members to be clear about what has and hasn’t
changed. Basics about the new and existing insurance coverage follow.
1. Traditional and Roth IRAs and KEOGH retirement accounts at NCUA
insured credit unions are now insured up to $250,000, an increase from the
previous $100,000 coverage.
Effective April 1, 2006, NCUA insured credit union retirement accounts such as
Individual Retirement Accounts (IRAs) and Keogh accounts are insured up to
$250,000. Under new rules, traditional and Roth IRAs at one credit union are
now insured in the aggregate to $250,000. Additionally, NCUA insures Keogh accounts
separately in the aggregate to $250,000.
Retirement account insurance protection is separate and apart from insurance
coverage on other credit union accounts. For example, if you have a regular
share account, an IRA, and a Keogh at the same credit union, the regular share
account is insured up to $100,000, the IRA is separately insured up to $250,000,
and the Keogh is separately insured up to $250,000.
The increase to $250,000 for retirement account protection is important because
many people saving for retirement have accumulated well in excess of $100,000.
With the additional NCUA coverage, more members who rely on their credit union
as a safe harbor for retirement savings will be completely protected if their
institution were to fail. What’s more, the additional coverage means many people
will no longer need to go to more than one institution to get full coverage for
retirement funds in excess of $100,000.
2. Basic insurance coverage for other share accounts is still $100,000.
However, just as before, there are many ways to qualify for more than basic
coverage at one institution.
Generally, if a credit union member has more than one account in the same credit
union, these accounts are added together and insured in the aggregate. For example,
if you have a regular share account, a share certificate, and a share draft
account in your name alone, these accounts will be added together and insured up
to $100,000 separate from your retirement account.
What’s more, joint accounts you hold with other people are separately insured up
to $100,000. For instance, let’s say you have three accounts at one credit union—
a $30,000 share draft account in your name, a $60,000 savings account you own
jointly with your spouse, and a $100,000 account for a corporation you own.
Although the three accounts total $190,000, all of the money is fully insured by
NCUA because each type of account is in a different ownership category that is
separately covered to $100,000.
Also, revocable trust accounts may qualify for separate insurance coverage of
up to $100,000 per beneficiary if certain conditions are met. For example,
if you have a $300,000 payable-on-death account naming your spouse and two
children as the beneficiaries, upon your death the entire $300,000 would be
insured by the NCUA ($100,000 per beneficiary). This insurance coverage would
be separate from the money you have in other types of accounts at the same
institution.
And remember, under the new rules your retirement accounts are protected
up to $250,000 and insured separate from your other accounts.
3. The insurance limits could rise in the future, but it wouldn’t occur
before 2011, if at all.
The new law establishes a method for considering an increase in the insurance
limits on all share accounts (including retirement accounts) every five years
beginning in 2011, based in part on inflation. Otherwise, accounts will continue
to be insured as described above.
Beyond the new law, a few other important reminders follow:
No member has lost one cent of NCUA insured funds as a result of
credit union failures.
Fortunately, failures are relatively rare. But if your
credit union were to fail, NCUA would cover your share
accounts dollar for dollar up to insurance limits.
NCUA insurance applies to your credit union accounts,
not investments.
The NCUA protects share savings accounts, share draft (checking) accounts,
share certificates and other types of share accounts. NCUA does NOT insure
the money you invest in mutual funds, stocks, bonds, life insurance policies
and annuities.
If you or your family have $100,000 or less in all your accounts
at the same insured credit union, you don’t need to worry about
insurance coverage.
Your money is fully insured. If you have more than $100,000 at any
single credit union, you should take the time to be sure you are
fully insured.
For more information, start by visiting the
NCUA website to find the consumer brochure Your Insured
Funds. It offers details and provides more examples of insurance protection.
Within a few months, NCUA’s electronic share insurance estimator, an
interactive tool which enables you to calculate your NCUA coverage, will
again be available online at
http://www.ncua.gov/ShareInsurance/Index.htm.
The following illustrates additional coverage for insured credit union
accounts. 1
| Individual |
Individual |
$100,000 |
| IRA |
Retirement |
$250,000 |
| Keogh |
Retirement |
$250,000 |
| TOTAL: |
$600,000 |
| Individual |
Husband Individual |
$100,000 |
| |
Wife Individual |
$100,000 |
| Joint Tenancy Accounts |
Husband & Wife (Joint) |
$100,000 |
| Testamentary Revocable Trust Accounts |
Husband as Trustee for Wife |
$100,000 |
|
Wife as Trustee for Husband |
$100,000 |
| IRA |
Husband & Wife
(Both have an IRA) |
$500,000 |
| TOTAL: |
$1,100,000 |
| Individual Accounts |
Husband Individual |
$100,000 |
| |
Wife Individual |
$100,000 |
| |
Child Individual |
$100,000 |
| Joint Tenancy Accounts |
Husband & Wife (Joint) |
$100,000 |
|
Husband & Child (Joint) |
$100,000 |
|
Wife & Child (Joint) |
$100,000 |
| KEOGH |
Husband |
$250,000 |
|
The Husband is insured to $100,000 on his two accounts
with Wife and Child. The Wife is insured to $100,000 on
her two accounts with Husband and Child. The Child is
insured to $100,000 on his/her accounts with father and
mother.
|
| Testamentary Revocable Trust Accounts |
Husband as Trustee for Wife |
$100,000 |
|
Husband as Trustee for Child |
$100,000 |
|
Wife as Trustee for Husband |
$100,000 |
|
Wife as Trustee for Child |
$100,000 |
| TOTAL: |
$1,250,000 |
 |
|
 |
| Individual Accounts |
Husband Individual |
$100,000 |
| |
Wife Individual |
$100,000 |
| |
Child #1 Individual |
$100,000 |
| |
Child #2 Individual |
$100,000 |
| Joint Tenancy Accounts |
Husband & Wife (Joint) |
$100,000 |
|
Husband & Child #1 (Joint) |
$100,000 |
|
Wife & Child #2 (Joint) |
$100,000 |
|
Child #1 & Child #2 (Joint) |
$100,000 |
|
As in the previous illustration, none of the co-owners
have an interest of more than $100,000 in all the joint
accounts, so the total amount held by each of the co-owners
in all joint accounts is insured.
|
| Testamentary Revocable Trust Accounts |
Husband as Trustee for Wife |
$100,000 |
|
Wife as Trustee for Husband |
$100,000 |
|
Husband as Trustee for Child #1 |
$100,000 |
|
Husband as Trustee for Child #2 |
$100,000 |
|
Wife as Trustee for Child #1 |
$100,000 |
|
Wife as Trustee for Child #2 |
$100,000 |
| IRA |
Wife |
$250,000 |
| KEOGH |
Husband |
$250,000 |
| TOTAL: |
$1,900,000 |
1. Adapted from an FDIC Consumer News Special Bulletin
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