When most people retire, one of the first things they think of is protecting the income they have worked all their life for. After all, you want to protect every last dollar you have earned right?
One of the first things that come to the minds of most retirees and seniors are Bank CDs. Many are under the impression that this is the only safe place to put their assets. They also assume that this is the only place they can gain interest on their retirement savings without any risk at all. That assumption could not be more further from the truth. In this article, you are going to be exposed to what can happen to your retirement savings and what the banks hope you NEVER FIND OUT.
Have you ever asked yourself what happens to your hard earned income when it is placed in a CD? Not too long after your income is place into your CD, the bank loans that money to another source. That’s right, it is loaned out! They will make 60 to 70 percent off of your deposit while you’re promised 4 to 5 percent on your assets. 4 or 5 percent that you have to pay TAXES on at the end of the year. Yes, I said TAXES. But after all, your money is FDIC insured right? Sure it is. Does that mean that ALL your money is insured? ABSOLUTELY NOT!! Let me explain. By the way this applies to ALL of your retirement savings at your Bank, NOT just your CDs.
The Federal Deposit Insurance Corp or FDIC only guarantees that 100,000 of your income is FDIC insured. However, certain retirement accounts are eligible to be insured up to 250,000. Now here is the million dollar question many of you want to know. What happens if the Bank FAILS? Contrary to what most people may think, Banks, at times, DO FAIL. Bank failures are rare but they still happen. According to the FDIC, there were 28 bank failures since October 2000!! (See Link http://www.fdic.gov/bank/individual/failed/banklist.html). Even worse, the FDIC DOES NOT notify people when their bank has failed or is about to fail! The only way you find out is when your check/debit card gets denied or you arrive at your bank and it has a new name already.
Well what happens to your money once a bank fails? I will be more than happy to tell you so let me explain. The account owners which are within the FDIC guidelines normally are able to retrieve their money rather quickly. Well, what about those retirees with over 100,000 or those IRAs over 250,000? Those with assets not covered by the FDIC will become creditors to the receivership of the failed bank. “The FDIC will then sell off the failed bank’s assets and pay those account holders who were over the FDIC income limit, from the proceeds of that money. This process CAN TAKE YEARS. YES! It can actually take years to get all of your hard earned dollars back. Some of us dont have years or time on our side to retrieve all of our hard earned retirement income.