Have an awesome weekend. And remember above all else, God is in control.

Safe Investments Part I
Safe Investments Part II
Safe Investments Part III
Safe Investments Part IV

cd :O)

Boy, did I feel silly because I didn’t actually have the answer on our site. After all, we help people invest in federally insured banks and credit unions. Of all places, the answer should be able to be found here. And now it is.

And the answer is, there is really no difference as far as federal protection. Both cover your bank accounts (CDs, Savings, Checking, Money-Market) up to $250,000 through 12/31/13. If the Gov’t doesn’t extend that it will revert back to $100,000. Both cover your IRA accounts assuming they are in a bank account and not a securities account up to $250,000. That was a permanent change made in 2004. IRAs are insured separately then your regular bank accounts.

Both are federally guaranteed. The FDIC oversees and insures banks and the NCUA oversees and insures credit unions. However, the NCUA is currently in far healthier shape. Not that I believe the FDIC won’t be able to meet its obligations, you just don’t here about the NCUA having to bail out too many credit unions.

The biggest difference is credit unions overall, are in better shape then banks. We have dealt with countless bank closures the last two years. There has only been a handful of credit union closures. And the reason is the foundational difference between a credit union and a bank. At a credit union, everyone is a member and has one vote, no matter how big their deposits are. The credit union exists to extend the lowest loan rates and highest savings rates it can to its members. Credit Unions are non-profit organizations. Because of their non-profit status, they are limited in what they can invest in. Most of their investments are in boring things like CDs ( :O) ), Gov’t bonds, and treasuries. They are limited in who and what they can lend to. Both of these drastically lower the risk of having problems.

Now, I don’t want my banker friends to get mad at me. Usually, small community banks operate much like credit unions in that they put the people first. However, a bank is a for profit organization. Usually, a small group of investors has put their capital into the bank and they want a return on their money. The pressure for higher returns leads banks to make riskier decisions. And over the last two years we’ve seen the result of that.

So when it comes down to it, there is no difference in your insurance protection between FDIC and NCUA insured accounts. If either a bank or credit union fails that is federally insured, you will get your money back.

I hope that helps. Here is a funny video that you might enjoy on the subject.

cd :O)

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Highest CD Rates

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Without going into lots of detail about IRAs themselves, they basically are an investment account that grows tax free. You aren’t taxed until you take funds out. Traditional IRAs are made from pre-tax contributions and you can’t access those funds until you are 59 1/2 or older without paying penalties. There are some exceptions, but I don’t want to spend too much time on that. Roth IRA contributions are made after-tax. The account grows tax free, but you can also being to withdraw fund prior to 59 1/2 without penalty. If you wait until after 59 1/2 you aren’t taxed.

So back to the difference when it comes to CDs. An IRA CD won’t have any tax consequences until you begin to make withdrawals. With a non-IRA CD, you pay regular income taxes on the interest that is earned, regardless of whether you receive it.

For example, let’s say you open a $100,000 IRA CD for 3-years and a non-IRA CD at 5.00% APY. Over 3-years both CDs will grow to about $115,762.00. However, you will only have to pay taxes on the non-IRA CD. If you are over 59 1/2, at the end of 3-years you can take $5000 out and only owe taxes on that amount. The remaining funds can be left in the CD for another term. With the non-IRA CD you pay taxes on the full $15,762.00 (and generally you pay taxes when the interest is earned, so you would pay taxes on about $5250 per year).

An important note, IRAs have yearly contribution limits. You can’t just one day decide to create a $100,000 IRA CD. Those funds would have to have been accumulating over the years. SEP and SIMPLE IRAs (used by self-employeed and small business owners) have a fairly high yearly contribution limit. Traditional and Roth IRAs were $5000 for 2008.

View IRA CD Rates

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This follows another takeover a couple of weeks ago of First National Bank of Nevada and First Heritiage Bank. The insured deposits were transferred to Omaha National Bank.

This brings me to my latest article. I actually published it on Google’s new service, Knol. Here it is, Calculating FDIC and NCUA Insurance.

Let me?know what you think.

cd :O)

Here is the info from the FDIC (bolding added by me).

POD accounts are insured up to $100,000 per owner for each beneficiary if all of the following conditions are met:

• The account title must include commonly accepted terms such as “payable-on-death,” “in trust for,” or “as trustee for” to indicate the testamentary nature of the account.? These terms may be abbreviated as “POD,” “ITF,” or “ATF.”
• The beneficiaries must be indentified by name in the deposit account records of the bank.
• The beneficiaries must be the owner’s spouse, children, grandchildren, parents, or sibling.? A beneficiary that meets this requirement is called a “qualifying beneficiary.”

Much of the confusion has come about because many bank employees tell depositers that they just need to indicate the beneficiaries in the account records.? This is not true.? The account title must contain?the “secret” letters as noted above.? This means that if you are doing POD type accounts for the purpose of maximizing FDIC insurance coverage, you will probably need at least two accounts.?

For instance, if you aren’t married, but have a sibling you can have up to $200,000 of insurance at each bank.? You would need to have one account?titled ?”Your name” for $100,000?and a second account titled “Your Name POD”.? The second account also needs to have the benenficiary indicated in the bank records.? Although not required, it would be a good idea if there aren’t too many beneficiaries to put them on the account title after the “POD”.

What should you do if your accounts don’t have “POD” indicated on them?? That is an excellent question and I even sent the FDIC a message to clarify the requirements and I asked them exactly that.? Although my personal belief is that the FDIC would honor the intent of the account, I wouldn’t want to risk $100,000 or more.? Here is their response:

Inconsistent or incomplete records, in which the owner’s intentions are not clear or in which the regulatory requirements are not met may result in unintentional uninsured funds in the event of a failure of an insured bank.

As to your question, “What should a consumer do if a bank refuses to change the title, already has their funds, and refuses to send the uninsured funds back without penalty?” the FDIC would suggest filing a complaint with the FDIC stating the failure of the specific bank to comply with section 12 C.F.R. Part 330.10(b).? The website for filing a complaint is found at https://www4.fdic.gov/STARSMAIL/index.asp.

Feel free to contact us if you have any questions.

cd :O)

Peer-to-Peer lending basically cuts out the bank and you lend directly to the borrower. For obvious reasons, it is also known as Person-to-Person lending. Prosper is one of the premier services in this area. Your funds aren’t insured like an FDIC insured CD, and you can lose principal, but Prosper goes along way to make sure you know the background of the borrower.

Check out the new section, let me know what you think. Peer-to-Peer Lending.

If you are in the need for a loan and your credit isn’t stellar, check out loans for bad credit.

Signature loans can be another option.
cd :O)

Many blogging software programs also incorporated it when people leave comments.? This was mainly because blogs became suspectible to lots and lots of spam and the SEs didn’t want those links to miss with their ranking algorithms.? Most blog software now, though, has good spam filters.

Since, I feel good about our spam blocking, I found a plug-in that removes the no-follow.? Now, if you leave a comment, your site-link will receive some link love.

Here is a link to the tool.? Remove Nofollow Tool.? I don’t get anything from that link except for the satisfaction of knowing others may join the revolution.

cd :O)

Highest CD Rates

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