I have a 5 year add on cd at Freedom CU which I opened when Ken suggested it at the beginning or 2019. I do have 5 pods listed on the account and I am already over the 250 limit but I am hesitating to add more because of the pandemic and the possibility of CUs and banks going belly up in the near future because of loans going bad.. What do others think?
Answers
Weiss ratings upgraded Freedom CU to an "A" rating at the end of July. Prior, just after the end of 2019, the Weiss rating had been "A-". Weiss is a VERY tough grader. At Weiss, even a rating of "C+" is not bad at all. Only the very top credit unions garner an "A" rating. NFCU (Navy Federal), for example, is rated by Weiss at "A". NFCU is the largest credit union in America.
Hence your choice of credit union is excellent. Then, in addition, you're using your PODs to add insurance you are never even likely to need. So I would say you are a "belt and suspenders" sort of person. And that is smart in these challenging times.
All of the above notwithstanding, do not ignore the following:
At some point in December new credit union ratings will emerge, the ones for Q3 of 2020. Pay attention to them. Ken will offer a new rating on Freedom. Likewise, so will Bauer and finally Weiss. Pay attention to all of them, watching in particular for any change in direction. Even though you have chosen wisely, it never hurts to keep your eyes wide open.
Meanwhile, there is just about zilch chance of getting that rate any time between now and 2024 — so max it out now. Do they have an upward limit on how much you can add and get that rate — that’s about the only question?
I just saw an article that Ken Tumin wrote here in 2011 entitled “Maximizing Your FDIC Coverage with Beneficiaries.” In that article Ken states as follows:
Https://www.depositaccounts.com/blog/2011/05/maximizing-your-fdic-coverage-with-beneficiaries.html
“If the bank doesn’t allow you to divide the funds that will go to the beneficiaries in your own percentages, you can have separate accounts for each beneficiary. The FDIC will aggregate the accounts and treat them just as if they were one account. (my emphasis)
I tested this out using the FDIC EDIE calculator with a fictional scenario. In this example, Ed Jones wants to cover $1.25 million, and he wants his wife Susan Jones to be the beneficiary who will receive all of his money when he dies. He sets up 5 CDs at the bank. The first CD has a balance of $1,249,600 with his wife as a beneficiary. The other 4 CDs have balances of only $100 each, and each has a separate beneficiary that meets the requirements as described above. I took a snapshot of the output of the EDIE calculator which shows that all $1.25 million is insured.”
First, in my prior post I was talking more about the example mentioned in your first post, and not so much about Hank's example. I also went to the FDIC EDIE (https://edie.fdic.gov/calculator.html). Hank is using a credit union, of course, but I wanted to recreate your example using the FDIC calculator.
So I assume 2 accounts in a bank -
1) “Owner1” owns a single-owner account (“Account1”) with no beneficiaries, holding a $100 CD.
2) “Owner1” also owns a single-owner account (“Account2”) with 1 beneficiary (“Beneficiary1”), holding a $270,000 CD.
The calculator tells me that my total balance for all accounts at that bank is $270,100, but of that, $20,000 is left uninsured. What am I doing wrong? Thanks.
I now see that in Ken's example all of the accounts had a single but different beneficiary. When I changed the FDIC calculator to single owner $100 CD account #1 with beneficiary #1 and single owner $270K account #2 with beneficiary #2, it shows that all $270,100 is insured. The strange thing is that when I changed it to single owner $250K CD account #1 with no beneficiary and single owner $270K CD account #2 with one beneficiary, it shows that $500K is insured and $20K uninsured.
So it appears that while all the accounts are aggregated together and you don’t necessarily need to have two beneficiaries on the $270K CD account, you do need to have a total of two beneficiaries in any of your accounts to get the $500K insurance coverage on a single account. Strange, however, that a single owner account with no beneficiary and a single owner account with one beneficiary are considered two registrations giving each account $250K coverage, but they aren't considered two registrations when the accounts are aggregated together.
Whew! Appreciate everyone’s help in getting this nailed down as I’m about to go over my $250K limit with an add-on CD at a credit union and I only want one beneficiary on the big CD account but I want to make sure I’m covered to $500K.
https://www.fdic.gov/resources/deposit-insurance/brochures/documents/your-insured-deposits-english.p...