Are IRAs FDIC-insured?

An individual retirement account (IRA) can help you save and invest for retirement while receiving certain tax advantages. But what happens to that money if the bank or brokerage holding your IRA fails?

Whether your IRA is FDIC-insured depends on what’s inside it, not on whether it’s a retirement account. Deposit products like CDs, savings accounts, and money market deposit accounts held in an IRA at an FDIC-insured bank can qualify for FDIC protection. Stocks, bonds, and mutual funds don’t, even if you bought them in an IRA.

Are IRAs FDIC-insured?

IRAs can be FDIC-insured when they contain qualifying deposit products at an FDIC-insured bank. The Federal Deposit Insurance Corporation (FDIC) includes traditional IRAs, Roth IRAs, SEP IRAs, and SIMPLE IRAs in its "certain retirement accounts" ownership category.

An IRA is an account type, not an investment. What you choose to hold inside the account determines whether FDIC insurance applies.

When an IRA is FDIC-insured

Your IRA can receive FDIC coverage when it's held at an FDIC-insured bank and contains eligible deposit products like:

• Savings accounts
• Money market deposit accounts (MMDAs)
• Certificates of deposit (CDs)

FDIC coverage is automatic for eligible deposits at an insured institution. You don't have to enroll or pay for the protection.

When an IRA is not FDIC-insured

Many IRAs are investment accounts held through brokerage firms. If your IRA owns stocks, bonds, mutual funds, annuities, or other investment products, those assets aren't FDIC-insured.

That remains true even if you bought an investment product through a bank. The FDIC insures qualifying deposits, not investment performance or securities.

For example, putting $50,000 into an IRA CD at an FDIC-insured bank can qualify for FDIC coverage. Investing $50,000 in a stock mutual fund through an IRA doesn't.

Read more >> Saving and Investing: What Is a Non-Transaction Account?

‍What is an ownership category?
‍It's the FDIC's term for how you hold money at a bank, not what kind of account it is. Your checking and savings in your own name are the same category — one $250,000 limit covering both. A joint account with your spouse is a separate category with its own limit, and so are certain retirement accounts. It’s why one person can have well over $250,000 insured at a single bank: the coverage multiplies across categories, not across accounts.

How FDIC insurance works for IRAs

The FDIC treats qualifying IRAs and certain other self-directed retirement accounts as their own ownership category. This can provide coverage separate from money you keep in other ownership categories at the same bank.

Coverage limits

The standard FDIC limit for certain retirement accounts is $250,000 per depositor, per FDIC-insured bank. All qualifying retirement deposits you own at the same bank are generally combined when applying that limit.

Suppose you have a $150,000 traditional IRA CD and a $125,000 Roth IRA CD at the same insured bank. The combined balance is $275,000. The FDIC would generally insure $250,000, and the remaining $25,000 would be uninsured.

Opening several IRAs at the same bank doesn't multiply your coverage. Naming beneficiaries on an IRA doesn't increase the FDIC limit for this ownership category either.

‍What is a “self-directed” account? You choose where the money is invested, rather than a plan administrator choosing for you. IRAs qualify automatically, while a 401(k) qualifies if you can pick among investment options. Self-directed retirement deposits share one $250,000 limit at each bank. Plans where an administrator decides are insured under a different category.

What counts as a deposit?

FDIC insurance generally covers familiar bank deposit products, including savings accounts, CDs, and money market deposit accounts.

Be careful with similar-sounding products. A money market deposit account can be FDIC-insured when held at an insured bank. A money market mutual fund is an investment security and isn't FDIC-insured.

SIPC coverage for brokerage IRAs

If you have an IRA at a brokerage rather than a bank, you may have a different type of protection through the Securities Investor Protection Corporation (SIPC).

SIPC can protect customers when a SIPC-member brokerage fails and customer securities or cash are missing. The protection limit is generally $500,000 per customer for each separate capacity, including a limit of $250,000 for cash.

SIPC protection isn't the same as FDIC insurance. Most importantly, it doesn't protect you from investment losses. If a stock or mutual fund in your IRA falls in value because of market conditions, SIPC doesn't reimburse you for that loss.

Read more >> How to Save for Retirement

How to check if your IRA is protected

Start by identifying the institution holding your IRA and the assets inside the account. If it's a bank IRA containing CDs or other deposit products, check whether the institution is FDIC-insured. Use the FDIC's BankFind tool to check your bank’s status..

Next, total your eligible retirement deposits at that institution. The FDIC’s Electronic Deposit Insurance Estimator can help you estimate coverage.

If your IRA is at a brokerage, check whether the firm is a SIPC member and understand what SIPC does and doesn't protect. Don't assume that an IRA is insured simply because it's a retirement account.

Bottom line

IRAs aren't automatically FDIC-insured. Eligible deposits inside an IRA at an FDIC-insured bank can receive coverage, while stocks, bonds, mutual funds, and other investments don't. Qualifying retirement deposits generally receive up to $250,000 of FDIC coverage owned by the same person at the same insured bank.

What insurance can't do is build credit. Banks don't report deposit or retirement account activity to the credit bureaus, so you could have a fully funded IRA and still have a thin credit file.

They're separate systems, and lenders only see the second one. Kikoff helps you build credit with on-time payment reporting to the major credit bureaus. There’s no credit check to sign up, and plans start at $5 a month.