Monday, August 31, 2009, AM | 1 Comment
Despite signs of an improving economy, the nation’s banks are still struggling – in fact, the pace of bank failures has accelerated. A cascade of collapses began last year as the financial crisis struck. Eighty-four banks have fallen so far this year as tumbling home prices and spiking unemployment pushed loan defaults upward. That’s the largest number in a year since the early 1990s, at the highest point of the savings and loan crisis. It compares with 25 bank failures last year and three in 2007.
What can you do to protect your savings?
Accounts are insured by the FDIC up to $250,000 per depositor per bank. Joint accounts are insured up to $500,000, each co-owner of the account at $250,000. Individual retirement accounts, or IRAs, held in banks are also insured.
If you have multiple individual accounts at one bank, it’s important to structure them carefully so they don’t exceed the limits. The FDIC has a calculator on its Web site called the electronic deposit insurance estimator, or EDIE, that can help determine how much money in deposit accounts exceeds the insurance limits.
For your money in a failed bank’s deposit accounts that exceeds the insured limits, you become essentially a creditor of the bank. You would eventually recover some of your money, but the amount can range from 40 cents on the dollar up to the full amount. Recovery of the money could take months.
In a Nutshell
So talk to your bank while it’s still in operation. Some financial institutions have been quiet about their financial status as we have witnessed some failures recently. It has happened so many times. One day you wake up and you hear on the news that your neighborhood bank has declared bankruptcy.
So even if the economy gets on the rebound, it takes time, more time than you would think, that recovery propagates through the banks.
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