Over the past few years, the banking industry has been rife with uncertainty leading to high net-worth individuals wondering how they might safeguard their wealth.

One of the most effective ways to safeguard liquid wealth is by diversifying bank deposits so funds remain within FDIC insurance limits while still accessible for future use. FDIC insurance protects deposits up to $250,000 per depositor, per insured bank, per ownership category. This means individuals can increase the amount of insured funds by spreading deposits across different banks or account ownership structures.

Below we discuss how to navigate FDIC insurance limits by spreading your wealth between financial accounts, keeping it insured and ready for future use.

Key Takeaways:

• Ensuring FDIC insurance coverage has become more vital for high-wealth individuals amid recent interest rate fluctuations and bank credit rating downgrades
• Consider depositing funds in multiple banks and accounts to receive FDIC coverage
• Diversify your bank accounts by investing money into a variety of savings accounts, such as a high-yield savings account, money market accounts (MMA) or a Certificate of Deposit (CDs) account
• Use tools and resources offered by the FDIC to locate FDIC-insured banks and branches to guarantee coverage

Why Deposit Protection Still Matters

While the U.S. banking system remains stable overall, recent years have highlighted how quickly conditions can shift for financial institutions. Events such as regional bank failures in 2023 increased awareness of FDIC insurance limits and deposit concentration risks among high-net-worth individuals and businesses.

Regulators and financial analysts continue to monitor several structural factors that can influence bank stability, including:

Regulators and financial analysts continue to monitor several structural factors that can influence bank stability, including:

• Commercial real estate exposure at regional and community banks
• Higher interest rates affecting the value of long-term fixed-rate investments held by banks
• Rising funding costs as banks compete for deposits
• Broader economic and market volatility

For high-net-worth individuals holding substantial cash balances, these dynamics reinforce the importance of deposit diversification strategies that keep funds within FDIC insurance limits.

What Can High-Wealth Depositors Do to Protect Their Funds?

Developing a diversification strategy is critical for keeping funds insured and growing at a modest rate even during times of financial market volatility or economic downturn. Here’s how to safeguard your liquid wealth:

• Consider multiple banks. If the funds you currently have deposited into your bank exceed the FDIC insurance limit, consider moving portions of those funds to other banks. Maintaining multiple bank accounts across several different banks up to the $250,000 FDIC limit can keep your funds protected and fully guaranteed. This is a sound strategy regardless of whether the banking industry is experiencing challenges or not.
• Look into an account with a credit union. If you live in a community with only a few banks, don’t forget that credit unions are an option. These institutions have insurance through the National Credit Union Association, which works the same as FDIC insurance and also covers up to $250,000 per insured credit union, per member-owner, per account ownership category.
• Diversify across different savings accounts. Depositing your funds across different types of savings accounts can also be a solution. High-yield savings accounts, Money Market Accounts and Certificates of Deposit are all valuable tools with growth potential you can use in your diversification efforts while keeping your multiple accounts centered at one bank or branch.
• Deposit in CDARS or ICS programs at regional banks. The Certificate of Deposit Account Registry Service (CDARS) and Insured Cash Sweep (ICS) programs allow large deposits to be distributed across multiple participating banks while maintaining FDIC insurance coverage. Depositors can work with a single bank to place funds into instruments such as CDs or money market accounts while receiving consolidated reporting and maintaining one banking relationship.
• Ladder investments with brokerage accounts or Treasury securities. Investors may stagger the maturity of investments such as brokered CDs or U.S. Treasury bills. Treasury securities are backed by the full faith and credit of the U.S. government and can provide additional diversification for short-term cash holdings.
• Get creative with account titling. It’s possible to open a variety of different account types – business, joint, personal, etc. – within the same bank. For instance, a married couple could open a joint checking, savings and Money Market Account. Then, as individuals, they could each then create personal accounts with the same features, potentially guaranteeing up to $750,000 in FDIC coverage.
• Lean on the FDIC. Use resources like the FDIC’s BankFind Suite to find FDIC-insured banks in your area or in your region to ensure your deposits are fully covered and secure. The FDIC’s Electronic Deposit Insurance Estimator (EDIE) can be used to calculate the insurance coverage of all types of deposit accounts offered by an FDIC-insured bank.

Learn strategies for businesses to diversify amongst banking uncertainty.

To learn more about diversifying assets and strategies to keep your wealth intact and meet financial goals, contact Anders Family Wealth and Estate Planning below.