Is My Retirement Fund Insured?
When you contribute money to your retirement, it would be nice if it was there when you need it. Thankfully, your retirement benefits are insured so that you are assured of having whatever you've saved available to you. However, even with insured retirement accounts, you should understand what is and is not guaranteed.
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PBGC
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The PBGC is the Pension Benefit Guaranty Corporation. This entity protects and insures pensions. If you are receiving a pension from a government or your employer, then you are assured of your retirement income. The PBGC provides a minimum amount of money to you based on your accrued pension benefits. These benefits do not include money promised to you by your employer but not actually accrued (such as future bonuses).
SIPC
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The SIPC is the Securities Investor Protection Corporation. This organization does not directly insure retirement accounts but rather the investments in the account. The SIPC protects up to $500,000 per investor for securities purchased which includes $250,000 in cash. If you invest in a retirement account and have money in excess of this amount, then your excess is not protected.
It should be noted that the amount of protection is limited by the amount of money earned in the retirement account. Money that is gained or lost as a result of investment activity is not covered. To say it another way, the SIPC does not guarantee that your investments will perform a certain way and does not insure you against investment loss. It does not guarantee a minimum rate of return. It simply guarantees that the money you have earned in your retirement account at the time the financial institution failed will be paid out to you up to the dollar amount limits specified by the SIPC.
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State Guaranty Associations
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State guarantee associations are used to protect insurance policies. Cash value life insurance and annuity contracts are often used as retirement vehicles. The state guaranty associations are regulated at the state level and provide for protections that vary according to state law maximums. Because of this, your retirement account may be insured, but the level of protection will vary.
Like the SIPC, the state guaranty associations guarantee only the amount of money that is in the insurance policy (up to the state's guarantee limits) at the time the insurer fails. For fixed interest accounts, the amount of money that the insurance company promises you will be covered up to the amount that you have actually earned. Note that this means only the money in your account. Any future bonuses or total cash value projections (even of guaranteed amounts) are not going to be paid out to you.
FDIC
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The FDIC is the Federal Deposit Insurance Corporation. This institution protects your deposit with banks up to $250,000. The limit is imposed on deposits per investor per institution. If you've invested in a bank CD IRA, your money will be covered by the FDIC. You will receive all of the money that is in your IRA and invested in the bank CD.
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