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Leave room for interest when relying on $100,000 deposit insurance

Posted by: Aaron Pressman on July 28, 2008

Colleague Lauren Young has posted some advisors’ suggested cash protection investment plans for $1 million. I’d just add one caveat. The FDIC’s standard deposit insurance coverage of $100,000 per account ($200,000 for joint accounts and $250,000 for certain retirement accounts) applies to both principal and interest.

So if you are buying CDs, don’t deposit $100,000 at one bank if you also want the interest you earn to be covered by insurance. Most advisors I spoke with for my story about CDARS suggested $95,000, which leaves you under the insurance cap even if you’re getting a 5% interest rate.

Reader Comments

chet jasko

May 15, 2010 11:43 PM

follow-on to my 11.08.2009 comment re: pimco's adventure into equity funds. on 4.10.2010 pimco indicated it had hired anne gudefin and charles lahr to run its global deep value strategy funds: pthwx/pthdx/pthrx/phhpx. i think that they shall just steal/tweak the value investing ideas/findings/screens of dr. piotroski at stanford or attempt to lure dr. piotroski to pimco as he is in the neighborhood of pimco at newport beach.

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