A Good Problem – Insuring Over $250,000 in a Single Bank Account

A Good Problem – Insuring Over $250,000 in a Single Bank Account

It’s nice to have over $250,000 in savings, but it is a pain in the neck to have to split the money up in more than one bank in order to ensure that it is all covered by FDIC insurance. 

Given the instability in America right now, full insurance on savings is a must.  FDIC is an independent agency of the United States government.  It protects depositors against loss of their funds were banks to fail.  The FDIC was created in 1934, during the Great Depression, and since its establishment no deposits insured by the FDIC have ever lost a single penny.

So full FDIC insurance makes all the sense in the world.  And, any savings or CD account today valued at $250,000 or less is fully insured.  Any account over that amount in insured only for $250,000.

There are, however, a number of ways to insure funds over $250,000 in a single account.  Some require rather obscure and complicated steps.  But two are easy and both make a whole lot of sense, especially because it is a lot less complicated when you have all your savings in a single bank.

One very simple way to keep your money in one bank and stay fully insured when you have over $250,000 is to open a joint account with your spouse.  In such a case, the full value of the joint account up to $500,000 will be insured by FDIC.

A second strategy, a bit more complicated than a joint account, is to open a Revocable Trust account.  Revocable Trusts are a smart way to organize your personal resources – far better than a will – and to enjoy FDIC insurance on a single account as high as $250,000 times each and every beneficiary.  Thus, if an individual names four beneficiaries, a single account can be insured fully for one million dollars (four times $250,000).

While Revocable Trusts may appear a bit intimidating, they are easy and relatively inexpensive to set up.


August 2018 Outlook: Savings Rates Increasing and Poised to Move Higher – 5 Accounts to Consider

August 2018 Outlook: Savings Rates Increasing and Poised to Move Higher – 5 Accounts to Consider

Rate information contained on this page may have changed. Please find latest savings rates.

We’ve entered the long hot days of summer with all sorts of political and economic turbulence on the horizon.

Savings rates have firmed and would seem to be poised to move still higher, with the Fed likely to raise the Fed funds rate by 50 basis points to 2.25% to 2.50% before December. 

CD rates too have firmed, and, as we recently noted in this article, the spread between 1-year CD rates and the online savings rates has widened out to 60 basis points which is the widest it has been in over a decade.   Some will be inclined to reach for CDs with money that they will not need for the next year (see today’s best rates here), but we’d be cautious, even with short term CDs against the current backdrop.

Longer term CD rates are quite interesting.   We now see online 2-year CD rates as high as 2.95%, 3-year rates over 3% and 5-year rates pushing 3.25%.   However, the Federal Reserve’s most recent forecasts continue to guide towards a 3.125% Fed funds rate at the end of 2019 and a 3.375% Fed funds rate at the end of 2020.  With the possibility of a protracted trade war and rising commodity prices causing real inflation, we think rates could be much higher and would be especially cautious here.

So here are five accounts we’d focus on:

Here are five products worth taking a look at:

1. Marcus – 1.85% Online Savings rate

Marcus has outstanding customer reviews and, with its lightening fast ACH transfers, it is a good place to stash cash that you might need to access quickly.  Marcus is also a subsidiary of Goldman Sachs and if you listen to their executives on Bloomberg or CNBC, you’ll see that they have made a real commitment to the online savings and CD spaces.   We doubt they will be doing anything other than raising rates as the Federal Reserve moves.  To boot, Marcus is perhaps the only one of the major online banks where it seems very safe to go well over FDIC-insurance limits.

Editor’s Note:  Marcus is an advertiser on BestCashCow.   Please read our Advertiser Disclosure here

2.  Ally Bank – 1.80% Online Savings rate

Ally has been around for many years and, as reviewed on BestCashCow, is the gold standard in online banks.   It isn’t a bank that is going to raise their rates one day only to lower them (or to stop raising them) the next.  As rates rise, consumers can have full confidence that Ally will always stay competitive.  We also know that they won’t be quietly lowering their savings rates while they give new customers better ones.   Their TV advertisements promise as much.

3. Radius Bank Online Savings – 1.86% (requires balance over $25,000)

Radius Bank is a new entrant to the online savings arena, but has a neat cutting edge user interface.  This savings account is also worth a look as it can be easily partnered with a high interest checking account packed with features that can enable depositors to migrate virtually all of their branch banking to online banking.

Editor’s Note:  Radius Bank is an advertiser on BestCashCow.   Please read our Advertiser Disclosure here.

4. Ally Bank 11-Month No Penalty CD – 2.00% (requires a balance over $25,000)

We’ve been a fan of Ally Bank’s No penalty 11-Month CD for years.   If you have over $25,000 to invest, it ordinarily offers depositors a light yield improvement over their savings rates.  Like a CD, this product, guarantees that it will pay the 2.00% amount for almost a year.   In the meantime, it can be terminated and moved to the money market account at any time and without penalty.  You are also protected from the extremely unlikely possibility of falling rates.   With this product, Ally is essentially offering depositors a free option.

  1. Colorado Federal Savings Bank One-Year CD – 2.51% 

If you must reach for a 1-year CD, Colorado Federal Savings Bank provides the highest yield in an account that can be easily opened and funded online.   Their website is not so great, and you will encounter some challenges if you have closed your funding account at maturity, but we think that this is one to look at.  Some others with rates almost as high are listed here. Again, only look at one-year CDs if you really feel you must reach for the yield and read our 65 Questions to Ask before locking into any CD.

Before opening an online savings or money market account, we also encourage you to check local bank rates and local credit union rates.

 


The Wisdom of Old or Not-So-Old Age

The Wisdom of Old or Not-So-Old Age

While Bankrate no longer provides the most accurate and comprehensive information on bank rates (that distinction now belongs to BestCashCow or RatesAndInfo.com), they do sometimes produce interesting surveys.

Their latest survey indicated that 5% of those aged 18 to 37 say bitcoin is the best place to put money they won’t need for 10 years or more, whereas only 1.2% of those aged 38 to 53 favor it for long term savings, and less than 1% of those aged 54 to 72 do.

I myself am not so old, though I do fall into the bracket of people aged 38 to 53.   I cannot imagine what planet the 1.2% of my age cohort would trust bitcoin or any cryptocurrency, and I am startled that so many people who are younger would entrust their savings to these instruments.

While Bitcoin has fallen this year, it hasn’t collapsed completely as many - including myself – had predicted.   It, however, remains an artificial asset, a mirage, and one where $7,000 per coin has no more fundamental value than $0.32.

With age comes the reality that a crisis in confidence in an instrument can cause pandemonium, confusion and widespread selling of assets representing a claim on fairly predictable future cash flows.  History books will tell you that this has happened in 1929 and 1987.   Even in the youngest age bracket, many can remember the internet crash of 2000-01 and the financial crisis of 2008-09.   While fundamental strong assets were often devastated, fake assets (those assets not fundamentally backed by future cash flows) disappeared (eg., Enron collapsed in the aftermath of the internet crash).

To believe that bitcoin represents a store of value is to ignore those lessons and to bet on a constant and indefinite faith in a mirage that ignores fundamentals.   It also assumes that there will be no hiccups in broader financial markets that would cause people to lift the sheets and look underneath.

Investors should stick with savings and money market accounts, CDs, bonds and equities as major components of their financial portfolios.  Not bitcoin.

Image: ibtimes.co.in