Q: I know the FDIC recently changed the limit on deposit insurance. My wife and I have $225,000 in a money market account, and $300,000 in various CDs. Does the change affect us, and should we worry about the limits changing again?
A: The deposit insurance limit has been raised from $100,000 to $250,000. As this is written, that higher limit is only temporary, but a provision of the banking reform bill now pending would make it permanent. That bill may have passed by the time you read this, so check out the FDIC web site at www.fdic.com to find out the latest on deposit insurance.
Assuming the $250,000 insurance level, since that will be in place for the next few years at least, it sounds like you and your wife would be affected, in a couple of ways. The good news is that your $225,000 money market account should now be fully covered. The rule applies per depositor per bank, so even if this account were in one or the other of your names, you'd fall under the $250,000 ceiling. If the account is in both your names, the ceiling is effectively doubled.
However, if you have another $300,000 in CDs at the same bank, that would exceed the combined limit of $500,000. Consider taking this opportunity to shop for CD rates and start moving that money to another bank as your CDs roll over. Between the two of you, that $300,000 can readily fit under the FDIC insurance limit if it is at a different bank than your money market account.
One wrinkle on the above -- if any of the money is in an IRA, that is considered a separate depositor than you and your wife as individuals, and so could entitle you to more insurance coverage.
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