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NCUA vs FDIC: Understanding the Differences

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

You deposit money in the bank because it’s safe and always available when you need it. But who ensures that the money kept in banks and credit unions is safe? That’s the job of the FDIC and the NCUA.

The FDIC is the Federal Deposit Insurance Corporation, the government agency that insures customer deposits in banks and thrift institutions. FDIC insurance covers all deposit accounts, from checking and savings to CDs and money market accounts, and even some types of retirement accounts. The FDIC provides up to $250,000 of insurance per depositor, per bank, per category of account.

The NCUA, or National Credit Union Share Insurance Fund, insures accounts at federal credit unions, such as regular shares and share draft accounts. NCUA coverage also insures up to $250,000 in total deposits per owner, per insured credit union, per account category.

For all intents and purposes, the two types of coverages are identical, but FDIC insurance applies at banks and NCUA insurance applies at credit unions.

What FDIC insurance protects

It’s helpful to understand what kinds of accounts qualify for FDIC insurance protection. Here’s the rundown:

Type of Account
Description of AccountCoverage Limit
Checking accounts
An account you can write checks against

$250,000 per owner, per account
Negotiable order of withdrawal (NOW) accounts
An interest-earning account you can write checks against
$250,000 per owner, per account
Savings accountsAn account you can save money to, generally earning interest$250,000 per owner, per account
Money market deposit accounts (MMDA)An interest-earning account that usually pays more than a savings account and offers limited check-writing ability$250,000 per owner, per account
Time deposits, such as certificates of deposit (CDs)An account with a fixed interest rate and fixed date of withdrawal$250,000 per owner, per account
Cashier’s checks, money orders, and other official items issued by a bankA check or printed order for payment, guaranteed by the bank$250,000 per owner, per account
IRA, 401(k) and KEOGH retirement accountsSelf-directed retirement accounts with assets invested in deposits like savings, CDs, or MMDAs (speculative investments held in such accounts are not insured)$250,000 per owner for total of all retirement accounts with the same owner
Revocable trust accountAn account owned by one or more people that names one or more beneficiaries to receive the funds upon the death of the owner(s).$250,000 for each named beneficiary
Irrevocable trust accountAn account held in connection with an irrevocable trust$250,000 for the trust

What accounts are not protected under FDIC insurance

As noted in the table above, speculative investments are never insured by the FDIC, only deposit products. Speculative investments include products such as:

  • Stock investments
  • Bond investments
  • Mutual funds
  • Life insurance policies
  • Annuities
  • Municipal securities
  • Safe deposit boxes or their contents
  • U.S. treasury bills, bonds or notes

How to maximize FDIC insurance

There are a few ways to make sure you’re insured for as much as possible. They include:

  • Get an account for each family member. The FDIC insures up to $250,000 for each account owner, so if you and your spouse both have accounts at a bank, you’re insured for $250,000 each.
  • Open a joint account. The FDIC insures joint accounts separately from single-owner accounts, so you’d be insured for an additional $250,000 here.
  • Open a revocable trust. This is an account owned by one or more people that names a beneficiary (or more than one) to receive the deposits upon the death of the owner. A revocable trust account is insured for up to $250,000 for each unique beneficiary.

What NCUA coverage protects

When it comes to credit union accounts, here’s how NCUA coverage works:

Type of Account
Description of AccountCoverage Limit
Single ownership accounts
All credit union accounts with a single owner

$250,000 for all single-ownership accounts owned by the same person at one institution
Joint accounts
Accounts owned by two or more people with equal rights to withdraw money and no named beneficiaries
$250,000 per account owner
Retirement accountsTraditional and Roth IRA accounts and KEOGH retirement accounts$250,000 total for all IRAs and
$250,000 for KEOGH accounts
Revocable trustsAccounts owned by one or more people that name one or more beneficiaries to receive the funds upon death of the owner$250,000 per each named beneficiary
Irrevocable trustsAccounts owned by one or more people that name one or more beneficiaries to receive the funds upon death of the owner$250,000 per each named beneficiary

What NCUA coverage does not cover

Just like the FDIC, speculative investments are never insured by the NCUA, only deposit products. Speculative investments include products such as:

  • Mutual funds
  • Stocks
  • Bonds
  • Life insurance policies
  • Annuities offered by affiliated entities

How to maximize NCUA insurance

  • Open single and joint accounts. NCUA insurance covers up to $250,000 per account owner, per type of account, so you’ll be covered for up to $250,000 in your single-owner accounts and another $250,000 (per owner) in your joint accounts.
  • Open an account for each family member. Since NCUA insurance covers up to $250,000 per account owner, each account owner gets $250,000 of coverage for all single-owner accounts combined.
  • Open accounts at more than one credit union. You’ll be insured for up to $250,000 on your accounts at each institution.

NCUA vs FDIC: Is your account insured?

Determining if your funds are protected depends on where they’re located:

Bank account: You can ask your bank representative, search for the FDIC sign at your bank, or call the FDIC at 877-275-3342 to see if your account is covered. You can also use the FDIC’s BankFind tool.

Credit union account: You can ask your credit union representative or look for the NCUA sign at your credit union or on their website. You can also search for your credit union in the Credit Union Locator.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Kate Ashford
Kate Ashford |

Kate Ashford is a writer at MagnifyMoney. You can email Kate at kateashford@magnifymoney.com

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Investing

8 Ways to Build Wealth Using Your Investments

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

When you’re starting out as a young investor, it can be hard to know where to begin. The good news is that you’re in the best position to maximize your savings — you have time on your side. By sticking with the right strategy, you can build a healthy nest egg and enjoy a comfortable retirement. Here’s how.

How to build wealth by investing

Socking cash into a savings account may feel like a step in the right direction, but even if the account is earning a little bit of interest, it’s likely not outpacing inflation. That means that over the years, your savings could lose value. Smart investing allows your savings to grow over time.

1. Start early

In other words, start right now. No matter how little you can put away at this moment, the sooner you start investing, the better off you’ll be. That’s because compounding returns are more potent over time — as your investments grow, your savings grow, and as your savings grow, you have more money invested. It’s a powerful cycle.

“The most important thing is to start early and consistently invest, consistently save, so that it becomes a habit for you,” says Carol Fabbri, a certified financial planner in Conifer, Colorado. “If you start when you’re 20 or 25, when you get your first job, you’re going to be amazed at how much you accumulate.”

2. Take advantage of your employer’s benefits

If your company offers a retirement plan such as a 401(k), sign up. Having money taken out of your paycheck before you see it (and spend it) is one of the most effective ways to save for retirement. You won’t have to decide to save — it will just happen automatically on pay days. Plus, your contribution comes out of your paycheck pre-tax, lowering your taxable income and allowing you to delay paying taxes on the money until you take distributions in retirement.

And steady contributions win the race, research shows. According to data from the Investment Company Institute, the average 401(k) balance for people who consistently saved from 2010 to the end of 2016 more than doubled, growing at a compound annual average growth rate of 14.2%.

3. Maximize any employer match available

Many companies offer a 401(k) match based on your own contribution, such as 50 cents for every dollar you contribute, up to 6% of your salary. That means if you’re only contributing 4% of your salary annually, you’re missing out on free money since you’re not getting the full match.

It may not seem like much, but that match can add up. Consider a worker who earns $50,000 a year and her employer matches 50 cents to every dollar she saves, up to 6% of her salary. If she saves 10% to her 401(k), or $5,000, that means her employer contributes $1,500 per year for her retirement.

If both the employee and the company continue to contribute the same amount and the employee earns 6% on her investments, she will have more than $90,000 in 10 years. Without the employer match, however, she’d have just under $70,000.

4. Save as much as you can

The more you can invest, the more money you have working for you. In 2019, you can put up to $19,000 into a 401(k), or up to $25,000 if you’re 50 or older. Additionally, you can put another $6,000 into an IRA, or up to $7,000 if you’re 50 or older. And when it comes to taxable accounts, you can save as much as you want.

“We usually preach that you’re a good saver if you’re saving 10% of your gross income, and you’re a great saver if you’re saving 20%,” says Nate Creviston, a certified financial planner in Cleveland. If you can’t quite meet those goals yet, consider having your 401(k) contribution bumped up a percentage point every six months until you get there, or boost it every time you get a raise.

If you’re saving outside a retirement account, consider setting up automatic transfers from your checking account to your investment account on paydays — then set a calendar reminder to bump up the amount every six to 12 months.

5. Pay attention to fees

If you’re saving regularly but paying high fees on your investments, you’ll see lower returns — and a smaller nest egg in the end.

“Historically, fees are what changes the retirement outcome for people,” Creviston says. “We always suggest our clients find out what those fees are.”

Within employee retirement accounts, employees usually have little control over most of the fees. But you should absolutely check the fees on the investments available to you. Pay attention to the expense ratio, which is how much it costs to run a fund each year; the higher that ratio is, the more that fee will eat into your returns. When you have a choice between two similar funds with differing expense ratios, it may make sense to choose the one that costs less.

Outside of retirement accounts, there are other investment fees to watch for. Some investments may hit you with front-end sales loads, which are fees charged when you purchase assets. You may face surrender fees on some investments if you sell them within a specific period of time. And if you’re working with a financial advisor, there are advisory fees to be aware of — your advisor may charge by the hour, by the project or by a percentage of your portfolio, for example. The more you’re cognizant of what fees are on the table, the better you can make decisions to minimize costs overall.

6. Don’t cash out early

If you take money out of a 401(k) early, you’ll owe income taxes on the balance plus a 10% early withdrawal penalty, both of which could hurt your bottom line.

Even for non-retirement accounts, pulling out cash unnecessarily could have dire effects; you lose the growth potential of that money. If you have $5,000 in an investment account when you’re in your 20s and earn 6% returns, over 35 years that money would grow to roughly $40,000 — without another dollar invested. Withdraw some of that cash and your earning potential dwindles.

For best results, sock money away and leave it there as long as you can, unless it’s earmarked for shorter-term goals such as a down payment on a home or college expenses.

7. Rebalance regularly

Over time, as some investments perform better than others, your balanced portfolio may become somewhat skewed. For instance, if you were originally invested in 85% stocks and 15% bonds at the beginning of the year, you might be in 92% stocks and 8% bonds by the end. While that means your stocks are doing well, it also puts you in a riskier position, because more of your holdings are in equities. If you maintain a riskier balance and the market drops, you could lose more of your nest egg than you’d like.

It’s wise to review your allocation about once a year to keep your investment plan on track and ensure that you’re not taking too much risk. In this case, that would mean selling some stocks and buying some bonds to return your portfolio to the initial ratio. (Bonus: This strategy means you’re essentially selling high and buying low — and isn’t that the point?)

8. Revisit and update your portfolio as needed

Just like the car you drove when you were 18 probably isn’t the car you’ll drive when you’re 50, your investment needs will evolve over time. You will likely need to adjust your portfolio to become more conservative as you get closer to retirement age or to accommodate other priorities that affect what you do with your savings.

Additionally, your investments may change as fund managers leave or as companies tweak a fund’s mix. Examining your portfolio regularly allows you the chance to drop investments that have gotten too expensive or those that are on a trajectory you’re not loving anymore.

You will learn more about investing — and what you want from it — over time, leading you to make decisions that can put you in a better position. If you have questions about the right portfolio for you, a financial advisor can help you assess your current holdings and make the best plan for the future.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Kate Ashford
Kate Ashford |

Kate Ashford is a writer at MagnifyMoney. You can email Kate at kateashford@magnifymoney.com

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Investing

When to Take Social Security: 62 vs. 70

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

As you near retirement, one of the big questions you’ll have to consider is when to start taking your Social Security payments. Throughout a working lifetime, workers pay money into the Social Security system, and then they collect money back in a stream of income payments that often starts in retirement.

But when to start collecting is a big decision, because the age at which you claim Social Security affects how much you’ll receive for the rest of your life. Consider that the average 55-year-old man today can expect to live to 82 and a half, according to the Social Security Administration’s life expectancy calculator. And advances in healthcare mean that many people are in good shape well into their advanced years.

“In the old days, as somebody got older, it was like going down the mountain — they would get worse and worse as they got older and spent less and less,” said Brett Horowitz, a financial planner in Coral Gables, FL. “Now we’re seeing clients who are in their 70s and 80s, feeling fine the entire way up until the last six months [of their life]. They’re spending what they were spending before — they’re not seeing the reduction in lifestyle.”

In other words, your money needs to last. Here’s what to consider.

When are you eligible for Social Security?

If you choose to, you can start taking Social Security benefits at age 62 — and it’s the most popular age at which to claim benefits, according to a USA Today report.

But claiming retirement benefits at age 62 won’t maximize your earnings. In fact, for those born in 1960 and later, taking Social Security at this age means you’ll get 30% less each month than you would if you waited for your full retirement age (which is 67 for that age group). That means that if you waited until you were 67, your benefit might be $1,000 a month, but if you file for benefits at age 62, you’ll receive only $700 a month.

How age affects your Social Security benefits

What the government defines as “full retirement age” has evolved over the years. For those born in 1937 and earlier, full retirement age was 65. For those born in 1960 or after, full retirement age is 67. For those born in between, the magic number falls somewhere on the spectrum between those two ages. (You can look up your full retirement age here.)

When you reach full retirement age, you’re entitled to your full Social Security benefits — or the full $1,000 a month in our previous example, say, instead of the $700 you’d get at age 62.

But that’s not the whole story. If you wait to claim your Social Security benefits until you hit age 70, your benefits will continue to increase by as much as 8% a year. Here’s an example of how your Social Security may change based on the age at which you start collecting benefits.

Monthly benefit amounts based on the age you start receiving benefits

This example assumes a monthly benefit of $1,000 at a full retirement age of 67.

Age62636465666770
Monthly amount$700$750$800$867$933$1,000$1,240
*Based on Social Security Administration data.

Should I take Social Security at 62?

As mentioned, 62 is the most popular age at which to start taking Social Security benefits, and it’s not hard to imagine why: You get to collect money sooner. But your monthly benefit is also significantly reduced.

For some people, claiming Social Security at age 62 isn’t so much a choice as a necessity. For instance, if you’ve been laid off from your long-time job in your early 60s, you don’t have much set aside in a 401(k) or IRAs, and you’re not having any luck finding another job, you may have to file at 62.

“Unfortunately, there will be people whose circumstances won’t permit any type of planning with Social Security,” said Peter Palion, a financial planner in East Meadow, NY. “They have to take it; they have no other choice.”

You may also want to file early if you think you’re not going to meet the average life expectancy for your age. “Let’s say you find out from your doctor that you have a terminal illness,” Palion said. “There’s no point waiting to eternity [to file] if your doctor says you’re not going to get to eternity.”

Other scenarios are case-by-case. Horowitz pointed to a client in his 50s who stands to inherit a $3 million life insurance payout when his elderly mother dies — but he might not see that money for another decade or more. “When he’s older, he’ll have plenty of resources,” Horowitz said. “But we’ve got to make sure he doesn’t run out between now and then. As soon as he turns 62, we’re going to claim benefits.”

Should I wait to take Social Security until my full retirement age?

The benefit of filing at full retirement age is that you’ll get your full retirement benefit. If you’ve got a spouse who’ll be dependent on spousal Social Security benefits, that’s crucial, because they’ll get the maximum spousal benefit available. The spousal benefit is capped at half of your benefits at full retirement age, so waiting until 70 won’t increase what they receive. (And they won’t receive anything until you file for your own benefits.)

Aside from spousal benefits, however, your retirement age is just another number on the sliding scale between 62 and 70. If you can wait another year or two to file — and your spouse isn’t dependent on your benefits — you’ll get up to an additional 8% for each year you delay.

Should I delay Social Security benefits until I’m 70?

Waiting until age 70 to take Social Security has some big monetary advantages. For one, you get an increase in your benefits for each year you wait past your full retirement age. So instead of that $1,000 a month you’d get at 67, you could now receive $1,240 a month at age 70.

This could be important for you, but it may also be important for your spouse if you die before them and your Social Security benefits are worth more than theirs. Depending on your spouse’s age, they’ll be eligible for either a portion of or 100% of your benefit amount as a widow or widower. If you wait until age 70 to claim, that benefit amount will be higher.

The best candidate for the wait-until-70 approach is someone who is either still working or who has adequate savings in other places such as a 401(k), IRA, or pension that they can live on until they file for Social Security.

Bottom line

Filing for Social Security is a big decision. There are a variety of calculators that can help guide your choice, such as this one from AARP. But a financial planner can also be a good resource on this, as they can take your life circumstances — savings, health, family — into account and help you make the best choice.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Kate Ashford
Kate Ashford |

Kate Ashford is a writer at MagnifyMoney. You can email Kate at kateashford@magnifymoney.com

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