Are 401k’s FDIC insured?

The short answer is no, 401ks are not FDIC insured (Fear not, there is a long answer so keep reading). FDIC insurance against banks and financial institutions that fail, not investments that fail. FDIC insurance applies to checking accounts, savings accounts and certificates of deposit (CDs). Investments like stocks, bonds, mutual funds, etc are not covered under FDIC insurance.

One exception to that is if your money is sitting in money market deposit accounts.  But once your money is moved into funds or stocks, the FDIC coverage no longer applies. So for example, if you have $50,000 in your 401k and $25,000 of it is invested in mutual funds but the other half is in a money market  deposit account, that means you have FDIC coverage for the $25,000 that is in the money market accounts if the company folds.

However, before you start worrying that your retirement savings isn’t safe, you should know that most U.S. brokerage firms are also covered by insurance by the Securities Investor Protection Corporation (SIPC). The SIPC protects customers in the event a company collapses and will return cash, stocks and other securities up to $500,000.