 Dear Dr. Don,
I used the Bankrate CD calculator and assumed an investment amount of $1 million. The program returned multiple CDs in the same bank, with the total held in one institution exceeding the FDIC insurance level.
How would I follow the ladder guide but also be able to have the entire amount protected by FDIC insurance?
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Gary Guarantee  Dear Gary,
It has been a while since I last tried out the
CD calculator, so I took it for a spin. The calculator lets you decide how far apart the rungs are on the ladder, but assumes a time horizon of five years.
What's neat about the calculator is that you decide whether you are willing to purchase CDs nationwide or just in your market, and the calculator returns the best yields available for a rung given your decision. You're right to be concerned about FDIC insurance limits in laddering your portfolio. Depending on the type of account and the account
owner(s), you may be able to have more than $100,000 in insured deposits with a single financial institution.
Some retirement accounts, for example, are
insured up to $250,000. Joint accounts may provide additional deposit insurance coverage.
I would not recommend that you have uninsured deposits. Check with the bank, or refer to the FDIC publication "
Your Insured Deposits."
The FDIC also has the
Electronic Deposit Insurance Estimator available on its Web site. The National Credit Union Share Insurance Fund, or NCUSIF, Web page has
links to similar publications and estimators.
Using Bankrate's
CD rate search functionality can let you search for banks that are offering yields on CDs that are close to the yields shown when using the CD calculator. That would allow you to select different financial institutions and eliminate the uninsured deposit issue.
Another alternative is to invest in certificate of deposit account registry service CDs. The Bankrate feature, "
CDARS: An easy way to beat the $100,000 FDIC limit," explains this investment option in greater depth.
You can invest the $1 million in one banking transaction but have the investment fully
FDIC-insured.
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