I want to thank Javahaaa for taking the time to explain some CD’s, FDIC info and how to get the best rates for your account. I’m not a financial advisor, just a nutty psychic astrologer/writer who gets premonitions about all kinds of things not just the stock market, so I really appreciate Javahaaa taking the time to explain this for my readers. I certainly wouldn’t be qualified to do it!
Javahaaa is a banker so please read the advice so kindly offered:
Denise, since many of your readers seem fearful about their banks and CDs , being in banking I want to set the record straight for them. Every CD you get at a local bank is FDIC insured. You do not have to worry about losing the money if the bank “goes under” or, more likely, is bought out by someone else. Period. This has nothing to do with astrology.
The only people who have to worry the bank’s solidity and losing $ are those who own stocks or bonds of the bank. Even all the CDs and checking/savings deposits at IndyMac were safe. If the bank does “fail” and is taken over by the government, you may have to wait a short while before the $ is returned, but you will not lose it, including the interest accrued to that point. If it is, more likely, bought out by another bank, your $ is at the “new” bank the next day (CDs still subject to same holding period they first were).
Now, whether or not the FDIC has enough funding to meet its obligations, should lots of banks “fail” at once, is a separate story – and _that’s_ what you’re readers ought to ask about, not any individual bank.
Anyone who wants to keep their nest egg in CDs should shop around for the best rate – and the “best rate” is not just the %, but its relation to the maturity of it…. i.e., a 3.5% for 9 months is better than a 4% for 5 years….ask your local bank branch manager (or other experienced banker there) to help you figure out the “best bargain” at their bank, and compare that to other banks (most are more than happy to help you). You can also shop online: bankrate.com is a great site for the public. Then, _put the maturity date on your calendar _, and when the maturity date is coming near, shop around the same way. Usually, if you just let it roll over at the same bank automatically, you will _not_ get as high a rate as you will by shopping around.
Banks run “promotional” rates to get your money in (often losing money themselves on the transaction, by giving you a higher % than they can get with their own $), and depend on most people being lazy and letting the $ roll automatically to a new, lower % CD once the promotional one comes due.
I hope this helps. Again, stock and bondholders should worry about the long-term solidity of the bank (or any company they invest in), but not people with their savings/CDs there. There are too many other things in day-to-day life to worry about – like spending less than you earn and saving enough (for the near future, and for retirement) to begin with.
Considering the fiscal condition of Medicare (which, at 3X the size of Social Security, is the federal program in the most trouble), and medical cost in general, saving for old age should be priority #1 for most people. They’re going to need a lot more $ than most think.