More Failures, More Coverage

If you’ve been reading the headlines about banks these days, you’re probably worried.  Last year, 140 banks shut their doors; as of the beginning of September this year, the number of bank closings is already up to 125.  That’s compared with three bank closings in the more normal economic times of 2007.  At last count (June 30 of this year), 829 other banks were on the Federal Deposit Insurance Corp.’s “Problem Bank List,” meaning they have weak capital positions that could lead to failure.

But if you have substantial assets on deposit at a lending institution, you do have some protection against losing money in a failure, and a way to check how much.  The FDIC provides government-backed insurance for your deposits, and the new financial reform bill permanently raised this amount to $250,000 per depositor.

As it happens, you probably have more protection than you think.  The FDIC has created a web calculator called EDIE (https://www.fdic.gov/edie/calculator.html), which lets you input the name of your lending institution, the value of your deposit, personal, business or trust accounts, and it will tell you how much of your money at that institution is insured.  A quick run through the site shows that if a husband and wife have a joint deposit account worth $500,000, then the total amount is insured–$250,000 each.  Suppose one of them also has a business checking account as a sole proprietor?  That, too, is insured up to $250,000.  A trust with beneficiaries is also protected, with the amount of coverage going up the more beneficiaries there are.  A tutorial on the site gives the example of a $1.2 million trust co-owned by a husband and wife who have three named beneficiaries (their children).  The way the math works, the full amount is insured; each child counts for $200,000 of FDIC insurance with the father and for the same amount with the mother.

Before you go to the web site, however, you might first want to check and make sure that your lending institution is a member of the FDIC.  Most member banks have official FDIC signs prominently displayed at the teller windows, but you can also check online at the FDIC web site’s “bank find” feature: http://www2.fdic.gov/idasp/main_bankfind.asp.

And finally, understand that stocks, bonds, mutual funds, annuities or other investments don’t qualify for FDIC coverage.  Only CDs, checking accounts and deposits are FDIC insured.

Authored by Bob Veres

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Are you going to be broke in retirement?

So I am not a sales person and try not to be pushy, but I have to share with you some of the results of the recent 2010 Retirement Confidence Survey.  The survey shows that 44% of all workers in the US just took a guess (is this a random guess?) at how much money they needed to save for retirement!  The next statistic is even more concerning.  Almost 30% of Households with annual income of $75,000 or greater thought they only needed $500,000 or less for retirement!

There is a rule of thumb that says you can withdraw about 4-5% of your portfolio per year throughout retirement.  This would mean that at 5% the household would only be drawing $25,000 ($500,000 * 5%) a year from their portfolio!  This would be a HUGE decrease in standard of living!

If you don’t know how much you should have saved, find a planner at www.napfa.org

Source:  http://www.ebri.org/pdf/briefspdf/EBRI_IB_03-2010_No340_RCS.pdf  (check out page 23)

Don’t pay for your free credit report

Don’t get lured in by “free” credit reports that are advertised on TV.  Notice they say “Free with enrollment in…”  Go to www.annualcreditreport.com to get a copy of all three of your credit reports for free once a year (perhaps make it a birthday tradition!).  You will have to pay if you want your credit score, but the report itself is free.  Look over the report to make sure you recognize all of the listed accounts and consider closing dormant accounts.

How do I manage cash flow?

Managing your day-to-day finances can seem like a daunting task. Computer programs such as Microsoft Money and Quicken can be cumbersome to learn and use given all their capabilities and set up time. With recent developments in technology, you can put your budgeting and cash-flow management on auto-pilot. You may want to consider using the user-friendly website at www.mint.com.

Mint allows you to set up a free account and add login information for your online financial accounts; including credit and debit cards and bank and investment accounts. As you spend, save, and invest, Mint automatically records transactions and categorizes them. For instance when you buy a mocha frappe from Starbucks, the budgeting program automatically categorizes the purchase under Food & Dining–Coffee Shops. Additionally, when you purchase an investment, it will be recorded in your Investments tab. You can use Mint.com to track and manage your spending, track your investments, or even build a comprehensive personal balance sheet, showing assets, liabilities, and a net worth figure.

Photo thanks to wibbly pig on flickr.com