Is TD Ameritrade FDIC Insured for Your Deposit Accounts?

When choosing a brokerage, it’s important to understand how your cash and investments are protected. Many investors assume all funds held with a financial institution are automatically insured, but coverage depends on where and how the money is held.

For TD Ameritrade customers, FDIC insurance applies only under specific conditions. Understanding when deposits are covered and what assets remain uninsured can help ensure you’re making informed decisions.

The Cash Sweep Program

TD Ameritrade’s cash sweep program moves uninvested cash into an interest-bearing account, allowing idle funds to generate a return. Depending on the account type, cash may be swept into a bank deposit account or a money market fund, each with different protections and risks.

For accounts eligible for bank sweeps, funds are placed in deposit accounts at participating banks, many affiliated with TD Ameritrade’s parent company, Charles Schwab. These deposits earn interest and may qualify for FDIC insurance, subject to coverage limits. The program may distribute funds across multiple banks, potentially increasing the total insured amount beyond the standard $250,000 per depositor, per bank.

Money market funds, another sweep option, are investment products rather than bank deposits. They do not qualify for FDIC insurance and are subject to market fluctuations. Regulated under the Securities and Exchange Commission’s Rule 2a-7, they must meet liquidity and credit quality requirements. While generally low-risk, they lack the government-backed protection of bank deposits.

FDIC Coverage for Deposit Balances

Funds in TD Ameritrade’s FDIC-insured sweep accounts are covered up to $250,000 per depositor, per bank. This protection applies only to cash deposits placed at participating banks through the sweep program. FDIC insurance covers losses due to bank failure but does not protect against market declines, fraud, or unauthorized transactions.

If a cash balance exceeds $250,000 at a single bank, TD Ameritrade’s sweep mechanism may allocate funds across multiple partner banks to maximize coverage. For example, a $500,000 cash balance could be split between two banks, ensuring full insurance. However, if an investor holds other deposit accounts directly with a participating bank, those balances count toward the FDIC limit, potentially reducing coverage through the sweep program.

In the event of a bank failure, the FDIC typically reimburses insured depositors within a few business days by transferring funds to another institution or issuing a check. Account holders do not need to file claims, as the FDIC processes reimbursements automatically. Reviewing cash allocations periodically can help avoid exceeding coverage limits.

Non-Insured Assets in Brokerage Accounts

Beyond cash, brokerage accounts contain investments not covered by FDIC insurance. Stocks, bonds, mutual funds, exchange-traded funds (ETFs), and options are subject to market risk, meaning their value fluctuates based on economic conditions, corporate performance, and investor sentiment. These assets are not protected against losses from price declines or issuer insolvency, making diversification essential.

Certain fixed-income securities, such as corporate and municipal bonds, carry risks tied to creditworthiness and interest rate changes. If a bond issuer defaults, investors may recover only part of their principal. U.S. Treasury securities, while backed by the federal government and considered low-risk, do not have FDIC protection. Their security comes from the government’s ability to meet debt obligations through taxation and borrowing.

Alternative investments, including real estate investment trusts (REITs), private equity funds, and commodities, introduce additional risks. These assets often have lower liquidity, making them harder to sell during market downturns. Private investments may also have less transparent valuation methods, making it difficult to assess their true worth. Investors should consider their risk tolerance and investment timeline before committing capital to these securities.

How FDIC Differs from SIPC Coverage

FDIC insurance protects bank deposits against institutional failure, while the Securities Investor Protection Corporation (SIPC) provides a different type of security for brokerage accounts. SIPC coverage applies if a brokerage firm fails and cannot return customer securities or cash, ensuring clients retain ownership of their investments.

SIPC coverage extends up to $500,000 per customer, including a $250,000 limit for cash balances within a brokerage account. Unlike FDIC insurance, which reimburses depositors directly in a bank failure, SIPC helps transfer customer assets to another brokerage or, if necessary, compensates for missing securities. This process is governed by the Securities Investor Protection Act of 1970, which established SIPC as a nonprofit entity to oversee investor claims.