With the failure of banks like Silicon Valley Bank and everyone talking about things like FDIC insurance and so forth, a question that I had never asked before, but was forced to ask is if my investments in a brokerage account safe? What about 401(K), IRA and SEP IRA?
SIPC Insurance Insures Brokerage Accounts
Similar to the FDIC, there is a program called the SIPC. This group provides insurance for investment accounts to the tune of $500,000 for investments of which $250,000 can be in cash. So a millionaire couple like us is insured for our whole net worth since we have a joint account with the same brokerage.
The other thing to remember is if you have more than one account, these limits are for each account. In fact, to be very honest, we actually have four accounts. My wife and I each have our IRA accounts, I have a separate SEP IRA account since I am self employed, and then together we have a joint trading account. So, altogether, we might have $3 million of insurance, which is way more than what we need since our net worth is a lot less than that right now but we are hoping that it will be grow over time.
It is important to remember that you should only have a brokerage account with a financial institution that is a member of SIPC. In retrospect, I am even wondering if it would have been better for my wife to open her IRA with another financial institution, just in case. However, we are with one of the largest brokerage banks in the US and hopefully nothing will go wrong. Secondly, if we go beyond $3 million we can always open a new account at that time.