The noise surrounding the financial sector has calmed down a bit. That however, does not indicate that the worst is over. Advisors and investors alike should do their homework to protect against investment losses and losses of savings plans.
A number of economists and analysts concluded that $1 trillion in write-offs is the new floor, not the ceiling. So far, banks and institutions have written off about $500,000,000, so half of the trouble might still be ahead. Financials have corrected severely in the past year than bounced off their low and might be in for more hurt.
For money being put away in CDs and savings accounts, keep in mind that the FDIC only insures accounts up to $100,000 per bank, per customer. Couples can open a joint account, which will automatically be insured for up to $200,000. If the money is in a CD, make sure your bank offers the Certificate of Deposit Account Registry Service which automatically distributes CD deposits that exceed $100,000 electronically to other member banks.
Funds in individual retirement accounts may be federally insured for up to $250,000, but only if they are parked in traditional bank products.
How good is the FDIC guarantee? IndyMac, one of the more popular, yet small banks that failed, had $19 billion in customer deposits. The Federal Deposit Insurance Corp has a $53 billion reserve and full backing of the U.S. Treasury. That backing of the U.S. Treasury might come in handy, because the reserve of $53 billion would not even cover one major bank failure.
It seems like safety is relative in the times we live in. Asset allocation and a portfolio diversified across all asset classes have never been of more importance.