00;00;00;29 - 00;00;22;12

Amy Irvine

Today's episode of Wine and Dime is sponsored by Rooted Planning Group, a fee only financial planning firm that believes life is about events supported by your dollars and cents, and we want to help you achieve your goals. Hop on over to www.rootedpg.com to learn more about the services.

00;00;22;12 - 00;00;44;20

Amy Irvine

Every week it's my goal to share financial information that helps you in both your life and financial vineyard. We hope it takes you from your roots to the journey of your vines and the influences in the air that have helped craft your delicious life like wine, life and finances, as have different palates that should be celebrated and not judged

00;00;44;20 - 00;01;10;22

Amy Irvine

Hi Wine and Dime listeners. Amy Irvine Here. I hope you all are having a wonderful day whenever you're listening to this podcast. Today we're going to be talking about a bunch of initials. SIPC, FDIC, NCUA and the insurance limits that go along with all those. I know this is something that a lot of people are a bit concerned about because of some recent bank failures that have happened to be in the news. And it's caused some concern that I think is warranted.

00;01;10;22 - 00;01;37;04

Amy Irvine

And we need to explore a little bit further. But before we dig into that, I wanted to give a shout out to Berklee Winery in Lubbock, Texas, as I continue on my adventure with my tastebuds throughout the United States this year, I wanted to show that I actually have featured them before on my podcast, but I was in Texas recently and so it made me think, Oh, I need to, you know, get back into trying some Texan wines.

00;01;37;04 - 00;01;59;09

Amy Irvine

ns I was able to find a night: 2019

00;01;59;10 - 00;02;21;22

Amy Irvine

So with that being said, this is a really heavy topic and maybe that's why I gravitated to a really heavy wine. When we think about what's going on in the U.S. right now, I know there's a lot of concerns about bank failures. I know there's a lot of concerns about making sure that people have their limits protected in the right manner.

00;02;21;23 - 00;02;43;20

Amy Irvine

There's a lot of concerns. And so I thought it might be a good idea for me to revisit what some of the the language is that you hear tossed around and what some of your limits are. So let me start first with what's called FDIC insurance, which is the Federal Deposit Insurance Corporation. Now, if you're a credit union member, you probably have what's called the NCUA.

00;02;44;08 - 00;03;04;28

Amy Irvine

That's going to be the same type of thing. So all these things that I say, whether it's NCUA, FDIC, there's still insurance behind these deposits. So everything that I say to you is going to be true with regards to the coverage. Now, I am going to post a link in the show notes with this information for you to be able to visit.

00;03;05;04 - 00;03;23;23

Amy Irvine

They have a nice little share, so I'm going to post that link in there so that you can go out there. You can also do a estimate here. So they have a great tool online that you can go to and actually see if your funds exceed the FDIC limits. So again, I'll I'll post both of those in the show notes so that you have them.

00;03;23;26 - 00;03;38;24

Amy Irvine

So let me kind of give you a little bit of background because I think it's really interesting. Now, all this information, again, is out on the FDIC website. So some of it, if you go out there, you're going to see that it's the same information that I'm giving you, because that is where I got the information from The FDIC.

00;03;38;24 - 00;04;02;15

Amy Irvine

insurance actually started in: 1933

00;04;02;16 - 00;04;35;05

Amy Irvine

So it covers things like checking accounts, non-negotiable orders of withdrawals called now accounts. You rarely see them called that anymore, but savings accounts, money market deposit accounts, CDs, and then even cashier's checks. Many orders and other official checks issued by a bank. Here's what it does not cover. It does not cover stock investments, bond investments, mutual funds, any kind of crypto assets, life insurance policies, annuities, any kind of municipal securities, safe deposit boxes or their contents, and then U.S. Treasury bills or bonds or notes.

00;04;35;05 - 00;04;56;25

Amy Irvine

Those are completely different vehicles. So they do not get FDIC insurance. So for some people that think, oh, I'm working with a bank or credit union on my investments, that kind of X, that coverage does not extend to your investments. That's something called spec. I'm going to go through that in just a moment. So the standard insurance amount is $250, $250,000 per depositor.

00;04;56;26 - 00;05;21;12

Amy Irvine

Now, there's been a lot of commentary in the news right now about should that limit be raised, you know, based on inflation, all of that. So, you know, that certainly is a possibility that that could happen. But right now it's 250 per depositor per insured bank for each account ownership category. Now, I said that very slowly because there's a lot packed into that.

00;05;21;12 - 00;05;51;00

Amy Irvine

So it provides separate coverage for deposits held in different account ownership categories and all deposits that are account holders in the same ownership category at the same bank are added together. So you can't have four accounts that have. Amy Irvine is the account owner on them, but she can have four accounts that maybe one is Amy Irvine, Ira and Amy Irvine Roth and Amy Irvine joint and then Amy Irvine that can have a tightened beneficiary or something like that.

00;05;51;00 - 00;06;16;09

Amy Irvine

That's not you know, that's a separate person. So the coverage levels really do. It's really important that you look at the account ownership categories and see where you fall into those categories. And again, you know, when I look at it, they have a great example out there. They have single accounts owned by one person joining account, owned by two people, certain retirement accounts, it's per owner.

00;06;16;16 - 00;06;44;25

Amy Irvine

These are all the different account categories. By the way, revocable trust, it's 250,000 per owner per unique beneficiary. I want to repeat that for revocable trust, it's $250 per owner for unique beneficiary. So. Right. And I own have a remarkable trust. We have five beneficiaries which had seven but seven beneficiaries. So each unique beneficiaries would actually get the $250,000 coverage.

00;06;45;02 - 00;07;19;07

Amy Irvine

Corporations, partnerships and unincorporated accounts per corporation partnership are unique and incorporate unincorporated association. Irrevocable trusts have 250,000 for the non contingent interest of each unique beneficiary employee benefit plan. That's 250 for each non contingent and dressed up each plan participant and then government accounts would be 250 per official custodian. So those are all the different kind of ownerships that get different types of coverage.

00;07;19;07 - 00;07;35;21

Amy Irvine

Now, why is it important that you make sure that you have the coverage? Like I said, the reason for this insurance was really because they wanted to make sure there was never a run on the bank again. And if the bank did fail, that there would be people would be protected, at least up to the limits that I just suggested to you.

00;07;35;23 - 00;07;56;03

Amy Irvine

Now, the question is, when a bank fails, what happens? So if you read the news recently, Silicon Valley Bank was one of the banks that recently failed. And of course there was one on the East Coast that was kind of a sister company to them. And they also were taken over by FDIC. Well, bank failure is the closing of a bank by a federal or state banking regulatory agency.

00;07;56;03 - 00;08;17;22

Amy Irvine

So when you look on the FDIC website, that's exactly what you're going to see when they come in and take over, they're going to insure the balance of each depositors account dollar for dollar up to that limit amount. Now, why that was a big concern was Silicon Valley Bank has because many of those owners I wouldn't say many, but some of those owners exceeded those limits pretty, pretty significantly.

00;08;17;22 - 00;08;47;24

Amy Irvine

eo that I did on that one. In: 2007

00;08;47;24 - 00;09;15;26

Amy Irvine

And if they had like a CD or something like that, it would give them a principal and some accrued interest. Sometimes that was on that particular amount of money. But even so, if you get your principal back, that's where most people are. Most concerned about. So that in a nutshell is FDIC and NCUA coverage. And I know that was an awful lot of information and 10 minutes or less now it's happened over because if you recall, I said FDIC, NCUA does not cover your investments.

00;09;15;26 - 00;09;50;15

Amy Irvine

That's something called s p i c sip it. So for those of you that are wondering what that stands for, EPIC is a Securities Investor Protection Corporation. And one of the things that people don't understand when it comes to investments, of course, we can never guarantee the actual market value. So things can kind of go up and down and typically is not meant to cover that, but it is meant to cover fraudulent activity or a investment banking company or investment like brokerage firm going kaput, for lack of a better word.

00;09;50;15 - 00;10;22;00

Amy Irvine

So it is there is protection of customers with multiple accounts. And again, this one, the terminology is called separate capacity. That's the term that's what the SIPC language is out on their website. They talk about separate capacity. And each separate capacity is protected up to $500,000 for securities and cash. Now, you'll notice on there, it says if it's cash and securities, the max on the cash is only 250, very similar figure than what it is to NCUA and FDIC.

00;10;22;00 - 00;10;44;03

Amy Irvine

But your account protection overall is 500. So if you have 300,000 in cash and $200,000 in securities, only 250 in cash is protected and then the other 200 would definitely be in securities. So but if you had 250 in cash and 250 and securities, that whole 500 and if it was 100% in securities, then the whole 500 would be protected.

00;10;44;03 - 00;11;20;21

Amy Irvine

Accounts held in the same capacity are combined for purposes of spec insurance. So, you know, this is where it's important to know. And and that's why some companies, some brokerage firms have additional spec coverage. So they will have I know, for example, we've done a lot of research on our custodians. Schwab happens to have access coverage that they will give to their account holders meaning that they'll give they have like a maximum amount of $600 million and access coverage, but each person would not get more than 159.5 million.

00;11;20;26 - 00;11;39;04

Amy Irvine

But but the grand total that they would cover is 600,000 above and beyond your coverage limits. That are already there. So it's kind of an aggregate coverage once it gets over the 500,000. And that's why people have multiple custodians sometimes because they want to make sure that they have that limit or they'll have it in separate account types.

00;11;39;04 - 00;12;04;02

Amy Irvine

So here's examples of separate capacities, very similar to separate but individual DHC excuse me, individual accounts, joint accounts, accounts for a corporation, an account for a trust created under state law, an individual retirement account, a Roth individual retirement account, an account held by an executor for a state and an account held by a guardian for ward or minor.

00;12;04;03 - 00;12;27;21

Amy Irvine

Those are all considered separate capacity, separate accounts. So they give a great example out on the website that I again, I'll post this in the show notes so that you have it. The example that they give as Mary has an account in her name and a brokerage firm, Mary is protected up to $500,000. Joe has a two brokerage accounts, each of them in his own name for purposes of Civic.

00;12;27;21 - 00;12;52;14

Amy Irvine

Joe's accounts are combined and protected, and Joe is protected by Civic up to $500,000. Now, Joe and Mary are married and they have a joint account which is separate from the individual account that they have each firm. And the additional maximum of $500,000 of civic protection is available for the joint account. On top of that, Joe has a Roth account and an IRA at the same brokerage account.

00;12;52;14 - 00;13;14;25

Amy Irvine

Joe is protected up to 500 for the Roth and up to 500 for his IRA. I think that gives a great example of the the additional coverage that you get people sometimes here, 500,000 like I have, you know, more than that in one particular brokerage account. But when we actually break it down and see where your coverages are, you may not have as much exposure as you think.

00;13;14;25 - 00;13;34;07

Amy Irvine

And we can all you know, one one thing that we always talk to people about is the risk associated with the company that you're invested with. And, you know, if you get to a certain level, do you want to work with multiple custodians so that you have the coverage that you feel comfortable with? This is something that we always think is a good idea to revisit every once in a while.

00;13;34;07 - 00;13;53;00

Amy Irvine

But right now it's something that's in the forefront of everybody's mind. And so we wanted to take just a short podcast to kind of walk through all that, explain it again. I'll provide the information that I mentioned in the show notes. I hope you found this information very helpful. Certainly, You know, thank you for listening to the show today.

00;13;53;00 - 00;14;08;16

Amy Irvine

I know it was a lot of information that we spewed out at you. We we hope that you did enjoy the episode and we'd love it if you shared this with your friends. And certainly if you could spend just a few minutes to go out on iTunes and read us, because the more people that read us, the more people can find us.

00;14;08;16 - 00;14;23;12

Amy Irvine

And, you know, will we're able to put good information like this out there into the world with your assistance. So thank you, everyone. And if you have topics that you would like to hear, don't hesitate to send them our way. We'd like to include them in the show.

00;14;23;12 - 00;14;43;19

Narrator

And that will about do it for today's episode of Wine and Dine. You can contact Amy through the website w WW dot routed pkg icon or amy app rooted dot com. You can also follow us on Facebook and Instagram at Rudy PG for the latest news. And if you have any questions, comments or topics you'd like to hear about, feel free to let us know.

00;14;44;01 - 00;14;52;07

Narrator

And don't forget to rate and subscribe the show wherever you get your podcasts. And again, thank you for listening and be sure to tune in next time.