Dear Dr. Don,
I recently won $9.7 million in my state's lottery. I was wondering if I should deposit my winnings into my bank checking account, my bank savings account or if I should use a credit union. How much money will each insure?
-- Gordon Golden
Good for you! Congratulations. You're right to be concerned about putting all your money in 1 bank account. Federal insurance for banks and for credit unions have similar limits for insured deposits. In general, the insurance limits are $250,000 per depositor at an institution insured by the Federal Deposit Insurance Corp. or the National Credit Union Administration.
Network of CDs
There is a certificate of deposit available from a network of participating financial institutions called CDARS, or the Certificate of Deposit Account Registry Service. This private service allows a depositor to have a multimillion-dollar deposit with 1 bank while keeping the money federally insured. The bank that takes in the deposit reinvests the money in multiple federally insured bank accounts with other banks. Your money is completely FDIC-insured, but you are dealing with only 1 bank.
Wealthy people can be very conservative in how they invest their wealth. They are more concerned with protecting principal than they are with earning a return on their money. You can find a way to stash close to $10 million in a financial institution and keep it perfectly safe.
Find a good professional
I see all of this as a stopgap measure while you seek a wealth manager who can put together an investment portfolio that can balance your desire to protect principal with a strategy to protect the money's purchasing power over time. Inflation can whittle down your portfolio's value, and low-yielding CDs or no-yielding checking accounts aren't going to help you with that investment problem.
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