But really, if you have more than $250k in cash, perhaps you should consider lowering your cash amounts. Certainly there are valid reasons to hold that much cash, but in general, most people probably shouldn't. If you put that cash in treasuries(even very short term treasuries so it's very cash like), you get paid interest for holding the bills, where most banks won't pay you much of anything for holding cash and treasuries are backed 100% by the US govt, unlike FDIC's 250k limit.
Slightly tangental, Fidelity also has the option to put your accounts in "lock down" mode to prevent funding *outflows* (even transfers between accounts). This can help secure your account in addition to 2FA. I learned about this recently after +10yrs at Fidelity. Sadly, I don't think it is enabled by default.
I wish my bank had the same sort of option to prevent someone from just randomly guessing my account number for an ACH transfer.
This is exactly what I have wanted for a long time! I need to keep some amount of cash reasonably liquid (3-10 day retrieval process would be fine), but hate it sitting around, seemingly with no way to require the bank to mandate that it is really me making the withdrawal request.
Edit: Random internet poster did some testing (https://www.bogleheads.org/forum/viewtopic.php?t=382555) and found that the Fidelity Lockdown Mode will block ACATS pulls, but not ACH. Better than nothing, though still not what I want: money goes in, money does not come out until I sign something in blood.
As long as you notice the ACH transfer and notify Fidelity, there is a very high likelihood they will be able to return your money. It's pretty easy to turn notifications on for those accounts and get notified as soon as Fidelity is notified about an ACH transfer.
This is one of the reasons ACH transfers take a few days to settle, to allow for fraud checking before settlement.
this will not work if someone broke into your account already, or stole your identity and disguised as you, the first thing they do is to unlock it. Fidelity should have some push-to-apps login approach, I'm not sure if it has one yet.
I think this is one of those rare opportunities that I can add something useful to the discussion based on knowledge rather than just my opinion. Some banks are structured in a rather specific way, which allow them to have some rather unique products ( compared to the regular banking that is ).
For example, certain IL bank has a fair amount of charters, which effectively allows them to offer deposit product that goes way over 250k ( at its core, it is basically CDARS though ). 2.5m if I remember right based on the amount of charters.
<< But really, if you have more than $250k in cash, perhaps you should consider lowering your cash amounts. Certainly there are valid reasons to hold that much cash, but in general, most people probably shouldn't. I
This argument has been going on forever and will likely continue for as long as human race exists. There are reasons one should and shouldn't do this, but the reality is that it will heavily depend on individual situation and, I assume, such a person will be sensible enough to ask someone/s that can appropriately advise whether it makes sense for that individual case.
I wasn't trying to say Fidelity was the only game in town that will automatically manage the FDIC insurance process for you. One bonus for Fidelity, their program has been around a while and they manage more money than the US Govt spends in a year, so they have definitely grown into the, to big to let fail category.
Fidelity also offers an alternative, to its automated FDIC-insured deposit sweep, of keeping a brokerage/retirement account's cash in SPAXX, which is currently yielding 4.22%. (Both options are mostly transparent to the UX, and happen automatically -- you normally only see the dollar total, and a monthly interest/dividend transactions.)
SPAXX is riskier than FDIC-insured sweep, but I don't know how much riskier.
Thanks for the tip. I’m at Schwab and it appears they have a rough equivalent called SWVXX. I’ve been considering going more into CD/bond ladders for the rates lately, but it sure would be nice to have the flexibility to pull money out whenever.
Read the prospectus, they are required by law to list all of the known risk(s) in that document.
In general, MMF's are mostly identical to cash, but they do have some quirk(s) that might cause problems, and it should be noted that none of them are FDIC insured, and SIPC insurance(which they will qualify under) is drastically different than FDIC. https://www.sipc.org/for-investors/
One problem with SPAXX (which I realized when doing my state taxes last week) is that the monthly dividends it pays aren't exempt from state income tax. I expected that they would be, since SPAXX invests in federal-level government bonds, but they aren't.
The real pro move would have been to create a Stripe payment link for your entire balance (and hit it as many times as you need to up the Stripe transaction maximum), and use your corporate SVB card to pay it all into your Stripe account. That way you don't have to use the bank wire facility, but can use the card networks.
I'm not sure that actually "works" in a situation like this. But it sounds good on paper I think.
Not that I don't believe you, but you mind linking some? the best I could find was wealthfront cash, which is isn't a savings account but is giving 4.05% apy. Which is pretty good, but inflation's up at like 6.5%, so it's still a bit of a net loss
Lots of banks offer services like these; for example, IntraFi Network Deposits, which is mentioned in the article has more than 3000 members, which is more than 50% of US banks, since there are less than 5000 commercial banks in the US.
"if the owner of a single account has designated one or more beneficiaries who will receive the deposit when the account owner dies, the account would be insured as a revocable trust account." (page 4)
Doesn't this quote mean your method would only let a single person have 500k insured? Since any third account that names a second POD beneficiary would be considered a revocable trust and there is a limit of 250k for all of one person's revocable trusts (page 3)?
Yes! Very easy to do. But in 2008 banks that failed were only giving out $250,000 initially and people using this and similar tricks had to wait much longer.
Not an expert, but it seems like it is true. Quoting page 11:
"""
When a revocable trust owner names five or fewer beneficiaries, the owner’s trust deposits are insured up to $250,000 for each unique beneficiary.
This rule applies to the combined interests of all beneficiaries the owner has named in all formal and informal revocable trust accounts at the same bank. When there are five or fewer beneficiaries, maximum deposit insurance coverage for each trust owner is determined by multiplying $250,000 times the number of unique beneficiaries, regardless of the dollar amount or percentage allotted to each unique beneficiary. Therefore, a revocable trust with one owner and five unique beneficiaries is insured up to $1,250,000.
"""
IntraFi, suggested in the article, looks a bit sketchy. Read their terms and conditions.[1]:
"No Liability or Damages. INTRAFI SHALL HAVE NO LIABILITY OF ANY KIND RELATING TO, RESULTING FROM, OR IN CONNECTION WITH THE WEBSITE (INCLUDING BUT NOT LIMITED TO ANY CONTENT ON IT OR THE RESULTS OBTAINED FROM ITS USE), THESE TERMS AND CONDITIONS OF USE, OR INTRAFI’S BUSINESS, OR ANY LINKED SITE, FOR ANY CAUSE WHATSOEVER, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE. IN NO EVENT SHALL ANY SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES AGAINST INTRAFI BE ALLOWED, EVEN IF INTRAFI HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, AND THE EXCLUSIONS OF DAMAGES IN THESE TERMS AND CONDITIONS OF USE ARE INDEPENDENT OF, AND SURVIVE THE FAILURE FOR ANY REASON OF, ANY OTHER REMEDY."
What IntraFi is supposed to do is place your money in a large number of different banks. But what if they don't? Or they screw up, and put too much money in some flaky bank.
The whole point of IntraFi is that it has to work when the financial system is in serious trouble. Otherwise, it has negative value, as an additional point of failure.
No one is giving them hundreds of thousands of dollars based on the terms and conditions of their website. There will be actual legal contracts to be signed, and those will be the relevant contracts in event of a problem occurring.
Annoyingly, I cannot actually find their agreement on their website (which is annoying common for financial services), but I found what looks like their contract on a random third party site through google [0]. If you are actually considering giving them hundreds of thousands of dollars to manage, you could contact them and ask for a copy of their standard agreement.
"... WE, INTRAFI, AND BNY MELLON WILL NOT
HAVE ANY LIABILITY TO YOU OR ANY OTHER PERSON OR
ENTITY FOR: (i) ANY LOSS ARISING OUT OF OR RELATING TO
A CAUSE OVER WHICH WE DO NOT HAVE DIRECT CONTROL,
INCLUDING THE FAILURE OF ELECTRONIC OR MECHANICAL
EQUIPMENT OR COMMUNICATION LINES, TELEPHONE OR
OTHER INTERCONNECT PROBLEMS, UNAUTHORIZED ACCESS,
THEFT, OPERATOR ERRORS, GOVERNMENT RESTRICTIONS,
OR FORCE MAJEURE."
Note that "theft" is in that list. If they had a "hack", it's not their problem.
There's also the part where they are listed with BNY Mellon as the owner of the CDs. The customer is not, apparently, on BNY Mellon's records:
"Each CD will be recorded (i) on the records of
the Destination Institution in the name of BNY Mellon,
as our sub-custodian, (ii) on the records of BNY Mellon
in our name, as your custodian, and (iii) on our records
in your name."
Remember, what IntraFi is doing has to work when the financial system is under extreme stress. Otherwise, it's pointless.
I have often wondered how celebrities and other “rich” people dealt with cash assets, this is interesting in the unlikely event I ever strike it rich.
The flip side of the coin is how do rich people select accountants and wealth managers that they can trust? I have heard so many horror shows of celebrities getting ripped off by their accountants. It seems to happen even more to poor people who suddenly become rich - lottery winners seem unable to hang onto the cash. And the Murdaugh murder trial revealed networks of lawyers and fiduciaries playing fast and lose with client money (one example was a trust manager loaning Murdaugh huge amounts of cash from a trust for two minors who mom was killed in an accident, and the girls got a multi million judgement).
Are there trust networks? Or word of mouth and luck?
If you get set up with a good legal firm they'll point you in the right direction. A lot of people who get ripped off got tied up in some shady dealings but a good attorney will not only have connections, they'll keep you with people who pass the sniff test.
Finding good people is difficult. Like anything else, you need internal controls. Unaffiliated attorneys and accountants who have an interest in asking awkward questions.
I'm surprised some low-fee automatic solutions aren't recommended here. Robo-advisors can split your cash across multiple banks on the backend. Using WealthFront[0] as an example, their cash account offers 4.05% APY, and FDIC insurance on balances up to 2M using a ton of partner banks[1] (each with 250k insurance, or 500k for join accounts). It also can send checks, issues debit cards, etc.
Number 5 is a pretty good deal. You can buy CDs from other banks without opening an account there. The CDs have your typical duration, from one month to multiple years. Each CD is FDIC insured up to the $250K limit. So not only do you get a decent yield on your money, it's FDIC insured as long as you spread the CDs across multiple banks.
Just for fun: CD's are not required to be FDIC insured, it's optional based on the issuer of the CD. I'm not aware of any these days that are not FDIC insured, but that doesn't mean they don't exist.
Your brokerage(assuming you have one) can sell you FDIC insured CD's as well, you don't have to go to $BANK to buy them. Assuming you want lots and lots of CD's this can make buying and managing multiple CD purchases a lot easier.
Don’t put it in a bank. Use a brokerage that gives you extra insurance - some insure up to $100M.
Also brokerages that aren’t regulated as banks generally can’t touch your assets. Equities and bonds are yours. You can fill out a form to have them transferred somewhere else. If your brokerage is regulated as a bank, in the U.S. they seem to be able to “bail in” using your assets - which seems sketchy as fuck.
I don’t know why people keep more than $250k (or 100k euros or 80k pounds, or whatever the insured amount is) in a single bank. Nobody understands the risks involved in the financial house of cards that banks build. Don’t trust them.
If I had $250k sitting like a duck in my bank account, I don't think I would take my financial advice from random websites. Sorry, but I just don't understand what the target audience of this is.
I found it useful. If you don't have any loans, make a lot a money, have no kids or expensive hobbies, and you already are maxing out your 401K, it just sorta piles up over the years. It's nice to read something like this once and a while since I don't have anyone to ask. Like should I move it from my credit union to my investment account. Is there a difference in insurance between the two?
You should do some more research than simply reading whatever is posted on HN or just get a financial advisor because this is a failure in financial planning that is causing you to miss a lot of potential growth. No individual who would miss $250k should have that much sitting as cash in a bank account unless they are planning to buy a house or other large purchase in the next couple of months. That money should be invested somewhere even if it is just all in short term CDs or bonds if you are an extremely risk-averse person.
If you have that much cash lying around, you really should talk to a financial advisor because there are some super low risk investments you can make that will be better and safer than cash, but it depends on your tax and financial situation, so no one can really tell you here.
I really want to go to the USA to be able to do that.
Where some workers who didn't go to college make more than 6000/month, and are able to store money.
France here, you win 2000€/month (on a 36k/year job) when you graduate from an engineering college. And the government is about to lower social security to have you save in 401Ks anyway.
If you’re a startup founder working on your tech 120h/week you don’t want to think about your money if you already have it.
I see this event as a black swan for startups: some will be wiped out like dinosaurs 65M years ago with their only fault being not aware of the meteor risk. Deal templates will get amended and the next batches will go on as before.
Besides I’ll be very surprised if SVB isn’t called JPM by 9 am Monday.
You overestimate the level of financial literacy that people have in tech industry, especially the immigrants... I can say from personal example that I "lost" a ton of money by letting cash just sit there, especially 10-12 years ago (I learned what stock market was, other than in the most abstract way, in 2008). And then when I learned a little bit was I talk to random friends, both immigrant and US-born, I get a feeling that my meager knowledge puts me in a pretty high percentile. Someone who grew up here asked me what CDs are; and just yesterday I was explaining what S&P 500 was ;)
Readit News
Otherwise I'd recommend reading from the source: https://www.fdic.gov/resources/deposit-insurance/ as there are lots of weirdness as one should expect from old complicated insurance systems ;)
But really, if you have more than $250k in cash, perhaps you should consider lowering your cash amounts. Certainly there are valid reasons to hold that much cash, but in general, most people probably shouldn't. If you put that cash in treasuries(even very short term treasuries so it's very cash like), you get paid interest for holding the bills, where most banks won't pay you much of anything for holding cash and treasuries are backed 100% by the US govt, unlike FDIC's 250k limit.
I wish my bank had the same sort of option to prevent someone from just randomly guessing my account number for an ACH transfer.
Edit: Random internet poster did some testing (https://www.bogleheads.org/forum/viewtopic.php?t=382555) and found that the Fidelity Lockdown Mode will block ACATS pulls, but not ACH. Better than nothing, though still not what I want: money goes in, money does not come out until I sign something in blood.
This is one of the reasons ACH transfers take a few days to settle, to allow for fraud checking before settlement.
In particular, certain transaction can not and will not be blocked.
For example, certain IL bank has a fair amount of charters, which effectively allows them to offer deposit product that goes way over 250k ( at its core, it is basically CDARS though ). 2.5m if I remember right based on the amount of charters.
<< But really, if you have more than $250k in cash, perhaps you should consider lowering your cash amounts. Certainly there are valid reasons to hold that much cash, but in general, most people probably shouldn't. I
This argument has been going on forever and will likely continue for as long as human race exists. There are reasons one should and shouldn't do this, but the reality is that it will heavily depend on individual situation and, I assume, such a person will be sensible enough to ask someone/s that can appropriately advise whether it makes sense for that individual case.
I agree with your perspective.
SPAXX is riskier than FDIC-insured sweep, but I don't know how much riskier.
Rates for the FDIC-insured and SPAXX: https://accountopening.fidelity.com/ftgw/aong/aongapp/intere...
Read the prospectus, they are required by law to list all of the known risk(s) in that document.
In general, MMF's are mostly identical to cash, but they do have some quirk(s) that might cause problems, and it should be noted that none of them are FDIC insured, and SIPC insurance(which they will qualify under) is drastically different than FDIC. https://www.sipc.org/for-investors/
I'm not sure that actually "works" in a situation like this. But it sounds good on paper I think.
Doesn't this quote mean your method would only let a single person have 500k insured? Since any third account that names a second POD beneficiary would be considered a revocable trust and there is a limit of 250k for all of one person's revocable trusts (page 3)?
The $250k applies per ownership category for each owner, and a recipient of a trust is not considered an owner for these purposes.
""" When a revocable trust owner names five or fewer beneficiaries, the owner’s trust deposits are insured up to $250,000 for each unique beneficiary.
This rule applies to the combined interests of all beneficiaries the owner has named in all formal and informal revocable trust accounts at the same bank. When there are five or fewer beneficiaries, maximum deposit insurance coverage for each trust owner is determined by multiplying $250,000 times the number of unique beneficiaries, regardless of the dollar amount or percentage allotted to each unique beneficiary. Therefore, a revocable trust with one owner and five unique beneficiaries is insured up to $1,250,000. """
"No Liability or Damages. INTRAFI SHALL HAVE NO LIABILITY OF ANY KIND RELATING TO, RESULTING FROM, OR IN CONNECTION WITH THE WEBSITE (INCLUDING BUT NOT LIMITED TO ANY CONTENT ON IT OR THE RESULTS OBTAINED FROM ITS USE), THESE TERMS AND CONDITIONS OF USE, OR INTRAFI’S BUSINESS, OR ANY LINKED SITE, FOR ANY CAUSE WHATSOEVER, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE. IN NO EVENT SHALL ANY SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES AGAINST INTRAFI BE ALLOWED, EVEN IF INTRAFI HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, AND THE EXCLUSIONS OF DAMAGES IN THESE TERMS AND CONDITIONS OF USE ARE INDEPENDENT OF, AND SURVIVE THE FAILURE FOR ANY REASON OF, ANY OTHER REMEDY."
What IntraFi is supposed to do is place your money in a large number of different banks. But what if they don't? Or they screw up, and put too much money in some flaky bank.
The whole point of IntraFi is that it has to work when the financial system is in serious trouble. Otherwise, it has negative value, as an additional point of failure.
[1] https://www.intrafinetworkdeposits.com/terms-conditions/
Annoyingly, I cannot actually find their agreement on their website (which is annoying common for financial services), but I found what looks like their contract on a random third party site through google [0]. If you are actually considering giving them hundreds of thousands of dollars to manage, you could contact them and ask for a copy of their standard agreement.
[0] https://agendasuite.org/iip/fannin/file/getfile/17288
"... WE, INTRAFI, AND BNY MELLON WILL NOT HAVE ANY LIABILITY TO YOU OR ANY OTHER PERSON OR ENTITY FOR: (i) ANY LOSS ARISING OUT OF OR RELATING TO A CAUSE OVER WHICH WE DO NOT HAVE DIRECT CONTROL, INCLUDING THE FAILURE OF ELECTRONIC OR MECHANICAL EQUIPMENT OR COMMUNICATION LINES, TELEPHONE OR OTHER INTERCONNECT PROBLEMS, UNAUTHORIZED ACCESS, THEFT, OPERATOR ERRORS, GOVERNMENT RESTRICTIONS, OR FORCE MAJEURE."
Note that "theft" is in that list. If they had a "hack", it's not their problem.
There's also the part where they are listed with BNY Mellon as the owner of the CDs. The customer is not, apparently, on BNY Mellon's records:
"Each CD will be recorded (i) on the records of the Destination Institution in the name of BNY Mellon, as our sub-custodian, (ii) on the records of BNY Mellon in our name, as your custodian, and (iii) on our records in your name."
Remember, what IntraFi is doing has to work when the financial system is under extreme stress. Otherwise, it's pointless.
The flip side of the coin is how do rich people select accountants and wealth managers that they can trust? I have heard so many horror shows of celebrities getting ripped off by their accountants. It seems to happen even more to poor people who suddenly become rich - lottery winners seem unable to hang onto the cash. And the Murdaugh murder trial revealed networks of lawyers and fiduciaries playing fast and lose with client money (one example was a trust manager loaning Murdaugh huge amounts of cash from a trust for two minors who mom was killed in an accident, and the girls got a multi million judgement).
Are there trust networks? Or word of mouth and luck?
Ok but that only kicks the can down the road. How do you get set up with a good legal firm? :)
Finding good people is difficult. Like anything else, you need internal controls. Unaffiliated attorneys and accountants who have an interest in asking awkward questions.
[0] No affiliation, other than being a happy customer. https://www.wealthfront.com/cash
[1] https://www.wealthfront.com/cash-account-participant-banks
see: https://www.fdic.gov/resources/deposit-insurance/brochures/d...
specifically this example: https://i.imgur.com/7kKHXEf.png
Your brokerage(assuming you have one) can sell you FDIC insured CD's as well, you don't have to go to $BANK to buy them. Assuming you want lots and lots of CD's this can make buying and managing multiple CD purchases a lot easier.
CDs = certificates of deposit, from the same site: https://www.nerdwallet.com/article/banking/when-why-to-open-...
Also brokerages that aren’t regulated as banks generally can’t touch your assets. Equities and bonds are yours. You can fill out a form to have them transferred somewhere else. If your brokerage is regulated as a bank, in the U.S. they seem to be able to “bail in” using your assets - which seems sketchy as fuck.
I don’t know why people keep more than $250k (or 100k euros or 80k pounds, or whatever the insured amount is) in a single bank. Nobody understands the risks involved in the financial house of cards that banks build. Don’t trust them.
Where some workers who didn't go to college make more than 6000/month, and are able to store money.
France here, you win 2000€/month (on a 36k/year job) when you graduate from an engineering college. And the government is about to lower social security to have you save in 401Ks anyway.
investment accounts are insured up to 500k/account by the SIPC
I see this event as a black swan for startups: some will be wiped out like dinosaurs 65M years ago with their only fault being not aware of the meteor risk. Deal templates will get amended and the next batches will go on as before.
Besides I’ll be very surprised if SVB isn’t called JPM by 9 am Monday.
It will be called the Deposit Insurance National Bank of Santa Clara (DINB) on Monday. https://www.fdic.gov/resources/resolutions/bank-failures/fai...