Are IRA CDs FDIC Insured? An Explanation of Coverage

Deposit insurance safeguards retirement savings, providing security for individuals planning for their financial future. Understanding how this protection applies to various retirement vehicles is essential for informed decision-making. This helps ensure accumulated funds remain secure, even in unforeseen circumstances involving financial institutions.

Understanding FDIC Deposit Insurance

The Federal Deposit Insurance Corporation (FDIC) is a U.S. government agency that protects depositors’ funds in insured banks in the event of a bank failure. FDIC insurance automatically covers deposits up to $250,000 per depositor, per insured bank, for each ownership category.

This coverage extends to various types of deposit accounts, including checking accounts, savings accounts, money market deposit accounts, and Certificates of Deposit (CDs). However, it does not cover investment products such as stocks, bonds, mutual funds, annuities, or the contents of safe deposit boxes, even if purchased through an insured bank. All insured deposits, including principal and any accrued interest, are protected through the date of a bank’s failure.

FDIC Coverage for Individual Retirement Accounts

Individual Retirement Accounts (IRAs) fall into a distinct ownership category under FDIC insurance rules. Funds held in various retirement account types by the same individual at the same insured bank are combined and insured up to $250,000. This limit applies to traditional IRAs, Roth IRAs, Simplified Employee Pension (SEP) IRAs, and Savings Incentive Match Plan for Employees (SIMPLE) IRAs.

The $250,000 coverage for retirement accounts is distinct from coverage for other individual accounts a depositor might hold at the same bank, such as personal checking or savings accounts. For example, an individual could have $250,000 insured in their IRA accounts and an additional $250,000 insured in their single-ownership checking and savings accounts at the same institution. Naming beneficiaries for an IRA does not increase its deposit insurance coverage.

Applying FDIC Coverage to IRA CDs

Certificates of Deposit (CDs) held within an Individual Retirement Account are covered by FDIC insurance. These IRA CDs fall under the retirement account coverage limit of $250,000 per depositor, per insured bank. Multiple IRA CDs or other deposit accounts within various IRA types at the same bank are aggregated for this $250,000 limit.

For instance, if a person has a traditional IRA CD with $150,000 and a Roth IRA CD with $100,000 at the same FDIC-insured bank, their combined $250,000 would be fully insured. If the combined balance of these IRA deposit accounts exceeds $250,000 at a single institution, any amount above this limit would not be insured. To ensure full coverage for larger IRA balances, individuals can diversify their funds across multiple FDIC-insured banks. Each separate FDIC-insured bank provides its own $250,000 coverage limit for retirement accounts.