Fri 24 Aug 2007
FDIC Only Insures $44,530.80 Not $100,000 As You Might Think
Posted by RichSlick under The Fed
[10] Comments
I know what you’re thinking. “Rich you idiot, FDIC insures $100,000 and not $44,530.80. Have you gone nuts?”
No, I haven’t gone nuts, while FDIC does technically insure $100,000 per depositor, the real purchasing power of 100k has eroded since 1980 down to $44,530 in today’s 2007 inflation adjusted dollars. Does this surprise you? Ever wonder why everything else is indexed to inflation but not FDIC insurance?
There’s an interesting historical look at FDIC insurance and I’ve summarized the key time line below:
1933 – After the Great Depression, FDIC is created by Congress
1934 – Insurance set at $2500.0 then raised to $5000 mid year.
1950 – Insurance increased to $10,000
1966 – Insurance increased to $15,000
1969 – Insurance increased to $20,000
1974 – Insurance increased to $40,000
1980 – Insurance increased to $100,000
You’ll notice that there hasn’t been any increase in FDIC coverage in 27 years! With annual inflation of 3%, 100k is now really only worth about $44,530. I suspect that they’ll need to be a dramatic increase in FDIC coverage over the next year or two in order to keep the banking system stable. Keep an eye out 
In case you’re wondering what FDIC insurance should be in order to keep things “level” it is $224,563.69. Oddly enough, FDIC insurance increased to $250,000 in 2006 for IRA accounts ONLY. Now for the multi-billion dollar question: Does anyone out there KNOW why FDIC raised the the limit for IRA accounts and NOT deposit accounts?
10 Responses to “ FDIC Only Insures $44,530.80 Not $100,000 As You Might Think ”
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Pingback from The Real Implications of the Subprime Mess & Inflation » Get Rich Slick
September 4th, 2007 at 8:47 am[...] to WHY people struggle with these bills and it’s very simple: inflation. When I wrote this post about how FDIC really only insures $44,530 instead of $100,000, I was hoping someone would flip the [...]
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Pingback from Can We Please Index “Richness” To Inflation? » Get Rich Slick
May 7th, 2008 at 8:01 am[...] before on how a 100k in 1980’s dollar is only worth about $44,000 in today’s dollars here. If we had decided that 100k was a “rich” man’s salary in 1980 then the [...]
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Pingback from FDIC Only Insures $43,216 and Dropping - Wake Up People » Get Rich Slick
July 17th, 2008 at 6:00 am[...] Rich Slick. If you’re new here, you may want to subscribe to my RSS feed. Last year, I wrote this post outlining how FDIC only insures $44,530 but now it’s a year later and the FDIC insurance [...]
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Pingback from Bailout Bill Will Fail, Won’t Stop Recession » Get Rich Slick
September 28th, 2008 at 9:41 pm[...] still surprised that there isn’t a single dime to shore up FDIC. I wrote over a year ago that FDIC needed to raise coverage limits to at least $224,000 for ALL accounts to keep up with the [...]
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Pingback from FDIC Will Raise Limits, Do You Want To Know Why? » Get Rich Slick
September 30th, 2008 at 6:20 pm[...] want to subscribe to my RSS feed. I’ve been writing about FDIC for a while now and I’ve written about the fact that FDIC really only insures about $44,000 and not $100,000 as most people think so [...]
August 25th, 2007 at 4:19 pm
Good post!
I usually like to think about stuff like this but I have to say I missed this one. Good job!
August 25th, 2007 at 5:23 pm
I eat, drink, breathe, sleep and think money all the time. It is my one true passion
August 25th, 2007 at 5:53 pm
Nice observation. Missed this one totally. It is great that you have got the figures in place which makes it easy to see how the FDIC insurance’s course over the years.
Cheers,
FIRE Finance
August 25th, 2007 at 6:02 pm
One thing that has probably changed in the past 20 years is the number of women that have their own jobs, and separate bank accounts. So whereas in 1974 the FDIC was insuring one bank account (let’s say for the average moderate income family) now they are insuring two, one for each spouse. High net worth individuals are going to be putting their money in multiple banks or brokerages anyways, then and now, so the point of FDIC is probably just to take care of the median, and they are may be doing about the same average job then as now.
August 25th, 2007 at 7:19 pm
According to this link,
FDIC will index to inflation starting 2010. I look forward to it assuming the current credit crunch doesn’t bring down the whole banking system. Still, they’re nearly 30 years behind.