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What Do You Mean No FDIC Protection?

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You can drive yourself crazy preparing for a disaster. Overthinking can be a problem. If you’re checking the exchange rate for Bolivian bolivianos to diversify your U.S. dollars, you’re overthinking.

Keep it simple. Don’t be discouraged by the new web of questions spun every time you check an item off your to-do list. It means you’re making progress. Don’t take for granted how much you’re learning.

Have enough cash for your peace of mind. If you’re losing sleep worrying about safekeeping, then you have too much. Open a safety deposit box, like I have, and keep it there or keep it in your checking account. Cash in your checking account is FDIC insured—$250,000 per person, per account, meaning $500,000 for a joint account.

Back up your survival cash—your U.S. dollars—with something of value. But don’t get too complicated. I backed mine up with gold, silver, and Canadian dollars. I did it in about an hour. You may already have done it through a lifetime of accumulation, whether it’s your collectible car, baseball cards, or diamond ring. Work with what you have.

Crossing off “learn about FDIC protection” on my to-do list created its own list of questions. For one, does FDIC apply to cash at Fidelity Investments or the Vanguard Group? It does not.

Securities in accounts carried by National Financial Services LLC, a Fidelity Investments company, for example, “are protected in accordance with the Investor Protection Corporation (SIPC) up to $500,000 (including cash claims limited to $250,000).” But NFS has arranged for additional protection for cash and covered securities to supplement its SIPC coverage. “This additional protection covers total account net equity in excess of the $500,000/$250,000 coverage by SIPC.”

There’s more. NFS added Lloyd’s of London as a provider of excess SIPC coverage up to an aggregate limit of $1 billion. “There is no per account dollar limit on coverage of securities, but there is a per account limit of $1.9 million on coverage of cash awaiting investment. This protection represents the highest level of excess SIPC coverage currently available.” None of this coverage protects against a decline in the market value of securities.

That’s about as clear as wax paper. But I’m comfortable saying Fidelity has your cash covered up to $1.9 million. This doesn’t mean money markets. They can fluctuate in value like a stock or bond—and even fall below your initial investment, which is known as “breaking the buck.” That makes choosing the right money market fund crucial. You see what I mean about the answer to one question leading to another question? I’ll leave that one for another day.

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E.J. Smith - Your Survival Guy

Preparing your investments and family for when disaster strikes.
E.J. Smith is the Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH, where he completed course-work in Practical and Defensive Handgun, Conceal Carry Pistol, Shotguns, Precision Scope Rifle and Kidnapping Prevention. E.J. plays a Yamaha Recording Custom drum set with Zilldjian cymbals. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@youngresearch.com. Sign up here to receive all the best content from Richardcyoung.com each week.

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