Are IRA Accounts FDIC Insured?
An IRA is an individual retirement account that holds investments that you are using to save for retirement. Whether money in an IRA account is FDIC insured depends on what it is invested in.
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Types
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The IRS allows you to invest funds in an IRA in almost any investment except collectibles and investments designed to benefit yourself. For example, while you can invest in real estate, you cannot use your IRA to purchase a home that you are going to live in.
FDIC Insurance
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FDIC stands for Federal Deposit Insurance Corporation. This is a government organization that guarantees certain accounts in case the bank fails. In these cases, the FDIC will pay you the money that was in your accounts up to the specified limit.
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Insured Accounts
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Two types of accounts that are often held in IRAs that are FDIC insured are certificates of deposit and money market deposit accounts. Only the portion of your IRA that is in these accounts will be insured.
Size
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As of 2009, FDIC insurance covers the first $250,000 of any money in your IRA that is invested in FDIC-covered accounts. For example, if you have $300,000 in your IRA in certificates of deposit and $100,000 in mutual funds, only $250,000 of the money in the CDs would be covered. According to the FDIC, these limits will continue through the end of 2013.
Considerations
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The limit for funds held in IRA accounts is separate from the limit for personal accounts at the same bank. For example, if you have $200,000 in a money market account and and $200,000 an IRA CD at the same bank, all of the money is covered. However, if you had $200,000 in a money market account and $200,000 in a regular CD, only $250,000 would be covered.
IRA Function
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IRAs are individual retirement accounts that are given tax-sheltered status, meaning money in the accounts grows tax free until withdrawn. Traditional IRAs offer a tax deduction at the time of the contribution while Roth IRAs allow you to withdraw the money and any earnings tax free at retirement.
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