FDIC/NCUA insurance question (re: Pentagon Federal)

[magellan_nh]

I'm about to invest in the Pentagon Federal 6.25% CD and I have some questions about the federal insurance coverage and about account registration options.

My thinking is that if DW and I each open our own individual accounts at Pen Fed we can each get $100k of NCUA insurance on our accounts. This seems better than opening a joint account that only gives us a total of $100k coverage.

Is my logic correct in this?

Finally, on the Pen Fed application, in the account registration section, you can list a payable on death beneficiary. I'm thinking we'd each list the other as the beneficiary. Does this type of regiistration have any negative ramifications?

Thanks,

Jim

 

[Nords]

My thinking is that if DW and I each open our own individual accounts at Pen Fed we can each get $100k of NCUA insurance on our accounts. This seems better than opening a joint account that only gives us a total of $100k coverage.
Is my logic correct in this?

Yes, and you can get an additional $100K with an account in your name listing your spouse as a joint owner, and a fourth $100K with an account in her name listing you as a joint owner. That's $400K total spread across four accounts and perfectly legal, although some feel uncomfortable putting that much in the hands of one financial institutution.

Finally, on the Pen Fed application, in the account registration section, you can list a payable on death beneficiary. I'm thinking we'd each list the other as the beneficiary. Does this type of regiistration have any negative ramifications?

POD means that it won't go through probate and will immediately be inherited by your spouse instead of going into a trust or some other tax-avoidance scheme. She won't be able to disclaim it and, in the event of your untimely demise due to some putative domestic dispute, she could move quickly enough to do anything with your accounts before any other family members could step in.

Having said that, our CDs with PenFed are also held with POD beneficiary.

 

[OAG]

Magellan: What Nords said is correct -- you may also want to check out this site: http://www.ncua.gov/ShareInsurance/Index.htm

 

[brewer12345]

This lays it out pretty clearly and it is right from the source: http://www.ncua.gov/Publications/brochures/insured_funds/funds.pdf

 

[magellan_nh]

You guys are great. Thanks!

The check is going into the mail today.

Jim

 

[DRiP Guy]

You guys are great. Thanks!

The check is going into the mail today.

Jim

Mine is right in front of yours! I put mine in the mail box Monday (but PO was closed then, and Tues). I had been a bad boy not making that dirty ol' money do any work for me until now, so now I am:

 

[kaneohe]

Is NCUA insurance basically a clone of FDIC? Any known differences?

Specific question: what is NCUA coverage of revocable living trust for married couple (in CA---community property state) where couple are trustors, trustees, and beneficiaries of trust.

At one time when I wondered about FDIC, I was comfortable thinking that FDIC coverage was 200K. Right or wrong? Same for NCUA?

 

[DRiP Guy]

Is NCUA insurance basically a clone of FDIC? Any known differences?

Specific question: what is NCUA coverage of revocable living trust for married couple (in CA---community property state) where couple are trustors, trustees, and beneficiaries of trust.

At one time when I wondered about FDIC, I was comfortable thinking that FDIC coverage was 200K. Right or wrong? Same for NCUA?

Sorry to be short on specifics to your narrow questions, but here are a couple of general facts of interest:

NCUA versus FDIC

All SCCU Deposits are federally insured by
the National Credit Union Administration (NCUA) up to $100,000.

The National Credit Union Administration (NCUA) is an independent agency of the U.S. Government. NCUA regulates, charters and insures the nation’s federal credit unions. In addition, NCUA insures state-chartered credit unions, like Space Coast Credit Union, that desire and qualify for federal insurance.

The National Credit Union Share Insurance Fund (NCUSIF), an arm of the NCUA, insures your funds.

What is an NCUSIF-insured financial institution?
Congress established the NCUSIF in 1970 to insure member share accounts at all federally chartered credit unions and most state chartered credit unions. NCUSIF insurance is similar to the deposit insurance protection offered by the Federal Deposit Insurance Corporation (FDIC). The NCUSIF is managed by NCUA under the direction of the three-person NCUA Board appointed by the President of the United States.

How does NCUSIF share insurance protect credit union members against loss?
Each credit union approved for NCUSIF share insurance must meet high standards of safety and soundness in its operation. Adherence to these standards is determined regularly through credit union examinations by federal and state examiners. If an insured credit union gets into financial difficulties and must be closed, the NCUSIF acts immediately to protect each member’s share account.

Note: Not one penny of insured savings has ever been lost by a member of a federally insured credit union.

If a federally insured credit union does fail, the NCUSIF usually makes necessary payments within 2 days from the time the credit union closes its doors.

http://www.sccu.com/Accounts/deposit_insurance.asp

and:

Myth: Credit unions aren’t regulated as well as banks.
Reality: Credit unions are highly regulated financial institutions, and their members’ deposits enjoy identical protection to FDIC coverage (up to $100,000 per account) under the National Credit Union Share Insurance Fund. Credit unions also have the distinction of not costing the American taxpayer a penny in bailouts. By contrast, the S&L failures in the 1980s and ‘90s cost taxpayers approximately $124 billion. The GAO, after completing a comprehensive study of credit unions in 2003, found that “[c]redit unions have a greater proportion of assets available to cover potential losses than banks and thrifts.”



The total assets of federally insured credit unions ($662.4 billion) amount to less than 7 percent of the total assets of FDIC-insured institutions ($10.2 trillion). Bank profits last year ($123 billion) amounted to nearly a fifth of all credit union assets.
The largest credit union has $25 billion in assets. By contrast, the largest bank, Bank of America, has $1 trillion in assets. In other words, a single bank has more assets than the entire credit union industry.
The median size of a credit union is $11.9 million. The median size of a bank is nearly $115 million. Nearly one-half of credit unions have less than $10 million in assets.

Caution link is to a pdf: http://www.ssfcu.org/MythvsRealityandFactSheet.pdf

 

[Dawg52]

Mine is right in front of yours! I put mine in the mail box Monday (but PO was closed then, and Tues). I had been a bad boy not making that dirty ol' money do any work for me until now, so now I am:

I wondered why you guys were mailing a check rather than making a transfer. I had the account number and routing number of PenFed but when I called Fidelity, they said it would have to be set up on the system and take 7 days before I could make the transfer. Not as quick and easy I thought. Same with my local bank. Guess I will just mail a check too.

 

[Beststash]

I wondered why you guys were mailing a check rather than making a transfer. I had the account number and routing number of PenFed but when I called Fidelity, they said it would have to be set up on the system and take 7 days before I could make the transfer. Not as quick and easy I thought. Same with my local bank. Guess I will just mail a check too.

When I talked to PenFed today they told me that if I gave them my banks routing number they could pull the money for me. I will be calling them Monday to try. I'll let ya know.

Peace

 

[DRiP Guy]

I'm still monitoring bank account to see when they make the withdrawal - not so far, but the mail probably just got there, plus the holiday crunch of piled up work, and it's a new program... so, I'll bet by Tuesday they will have drawn the funds out. I will keep the thread posted if anything noteworthy occurs.

 

[Dawg52]

When I talked to PenFed today they told me that if I gave them my banks routing number they could pull the money for me. I will be calling them Monday to try. I'll let ya know.

Peace

Yes, let me know how it goes. They didn't suggest this to me. I issued a transfer from Fidelity to my local bank so I can write a check. If Penfed will draw it from my bank, it will speed up the process.

 

[JohnEyles]

I have opened an account at PenFed and am happy as a pig in ****.

As a hypothetical question, why shouldn't one put one's entire non-equity
assets here (subject to the insurance limitations) ? Isn't 6.25% total
return a pretty optimistic ROR for a bond portfolio ? Hell, why shouldn't
my entire egg be here ? My calculations show that 6.25% will support a
4% WR for 40 years with inflation 3.5% or less.

But seriously, why is the maximum $10,000 on a single "certificate" ?

 

[Nords]

But seriously, why is the maximum $10,000 on a single "certificate" ?

Perhaps they're responding to customer demand & investor psychology.

If the day ever comes that I have to break a CD and cash it in early, I'd rather take the penalty on a few smaller certificates (to get closer to what I need) than to have to break a big one and overshoot my mark.

A number of smaller certificates could complicate the tracking of the transactions. But I purchased three in the same week and just add up their returns on our statement, entering the total as one number.

 

[DRiP Guy]

Weird. Just got a letter from them saying in part:

" Due to information from a credit reporting agency... all check deposits...will be subject to a 9-day business day hold. You may request a waiver of this provision after 6 months..." it goes on to list the agency as being Equifax.

Now, I only share the above because by happenstance, I literally just got my own copy of my credit report from the same source, Equifax, days AFTER that letter was written, and my credit is immaculate. No late or missing payments, no disputes, neither too much nor too little open credit. Long history. Same residence forever. Most accounts at zero balance, but with healthy limits. Only thing that has changed is I just paid off the mortgage, but that was a minimal amount in the scheme of things.

I guess my points are two:

1. No WAY this is actually based on my credit information; it must be boilerplate policy. I don't like that: if it's Penn Fed policy, just say so, I won't grouse. But don't blame it on the outcome from a credit report (that is sterling). I haven't run my FICO in a year or more, but it was right at 800 and nothing's changed except mort payoff.

2. I don't mind if the hold stays forever, it's a three year CD after all, but this is not a good way to start a relationship. Other than this it has been fine, so we shall see.

 

[d]

But seriously, why is the maximum $10,000 on a single "certificate" ?

i'm not aware that this is the case (though there is a $10k max on an ACH transfer)

 

[OAG]

That $10,000 limit seems incorrect. I just checked and I and DW have 5 CD's at PFCU in excess of that amount -- three are in excess of $25,000. I have been a member of PFCU for over 30 years and I sure am not aware of any $10,000 limit. Maybe it has to do with something unrelated to CD's -- maybe a "cash" transaction in excess of $10,000 requires another form to be submitted?

 

[JohnEyles]

That $10,000 limit seems incorrect.

Hmm, I dunno. When I apply for a "money market certificate" (that's
what we're calling a 6.25% CD, right ?) at the website, when I get to
Section 8, where you say how you're gonna fund your account, it
specifies a range of $1000-$10,000, at least for a bank transfer.

But I agree with the other poster that it make sense to break it
up some in case you wish to do an early redemption of some but not all
of a given maturity.

 

[Dawg52]

Hmm, I dunno. When I apply for a "money market certificate" (that's
what we're calling a 6.25% CD, right ?) at the website, when I get to
Section 8, where you say how you're gonna fund your account, it
specifies a range of $1000-$10,000, at least for a bank transfer.

But I agree with the other poster that it make sense to break it
up some in case you wish to do an early redemption of some but not all
of a given maturity.

I called them about the 10k limit. They said after you have an account for 6 months then the limit is removed. They indicated I would have to have my bank wire anything over 10k or just mail them a check. Seems kind of crazy way to do business but I guess you have to play ball if you want the 6.25%.

 

[Nords]

I called them about the 10k limit. They said after you have an account for 6 months then the limit is removed. They indicated I would have to have my bank wire anything over 10k or just mail them a check. Seems kind of crazy way to do business but I guess you have to play ball if you want the 6.25%.

I've only been with PenFed since last August, and back then I executed multiple EFTs of about $9000 each with no holds or other limits...

 

[JohnEyles]

They indicated I would have to have my bank wire anything over 10k ...

I've only been with PenFed since last August, and back then I executed multiple EFTs of about $9000 each with no holds or other limits...

Not to be a smartass, Nords, but I think $9000 is less than $10K

Speaking of PenFed, I just saw a PBS thing about military families coping
with "deployment" and definitely feel like this NMFA (the thing non-military
folk like me must join in order to join PFCU) is a worthy cause; I believe I'll
re-up even though it ain't required to maintain PFCU membership.

 

[Nords]

Not to be a smartass, Nords, but I think $9000 is less than $10K

No, but more than one of them accomplishes the same >$10K result without triggering any of their anti-terrorism precautions. Seems pretty silly to have a rule if it's that easily circumvented...

 

[JohnEyles]

No, but more than one of them accomplishes the same >$10K result without triggering any of their anti-terrorism precautions. Seems pretty silly to have a rule if it's that easily circumvented...

Oh ok, I see your point.

Kinda like the 3oz containers of liquids in your carry-on !

 

[HFWR]

Take me to Cuba, or I'll shampoo the entire plane...

 

[bosco]

Oh ok, I see your point.

Kinda like the 3oz containers of liquids in your carry-on !

not exactly--you are only allowed one 3 oz container. So the only way to circumvent it would be to make several round trips and bring 3 oz each time. But if you did that, it might be quicker just to check a bag....