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Is Your IRA Insured?

On our Discount Brokers discussion board the other day, Fool Community member Cocomartinez asked a good question:

I just rolled over my 401K into an IRA with Firstrade which pushes it just over $100,000. Should I be worried about insufficient SIPC insurance if disaster strikes? Would anyone recommend opening a second IRA?

Here's my reply:

Reputable brokerages are insured. Just as the FDIC insures bank accounts, the Securities Investor Protection Corporation (SIPC) insures brokerage accounts up to $500,000 per account (including up to $100,000 in cash). Note, though, that this insures your account against your brokerage going under, not your stocks losing value. (Sorry!)

Many brokerages even surpass SIPC levels of insurance, some offering protection up to or beyond a million dollars. There might be a shady brokerage or two out there that somehow isn't insured, though. Ask your brokerage (or prospective brokerage) for clarification on what insurance protection it offers.

Learn more about the SIPC and what it does at its informative website. Learn more about brokerages and how to choose a good one at our Broker Center.

And for info on IRAs and why you probably want to have at least one, drop by our friendly IRA Center. The following articles may also be of interest:

  • "Save $165,000 With Your IRA." In this article, I explain how you might have been able to save big bundles had you loaded your IRA with some top-performing stocks, such as Hansen Natural (Nasdaq: HANS  ) or Chico's (NYSE: CHS  ) , a decade ago. With Hansen, "A $5,000 investment would have turned into about $1.1 million. Your gain, taxed at 15%, would amount to a whopping $165,000! But if the investment were in a Roth IRA, you'd save that $165,000. Similarly, a $5,000 investment in apparel retailer Chico's would have turned into $865,000, and having it in your Roth IRA would save you a tax bill of perhaps $130,000."

  • "Put Your IRA on Autopilot." In this article, Tim Hanson explains how he's enjoying automated investing and explains how he built his portfolio. When he wanted exposure to emerging markets, his "low-cost, long-term solution was Vanguard Emerging Markets Stock VIPERs (AMEX: VWO  ) . With an expense ratio of just 0.3%, this ETF tracks the performance of the Select Emerging Markets Index. Major holdings include Sasol (NYSE: SSL  ) , Infosys (Nasdaq: INFY  ) , Cemex (NYSE: CX  ) , and PetroChina (NYSE: PTR  ) . The ETF is up more than 30% since its inception in March 2005. Not bad for a low-cost, low-stress option."

Cemex is aMotley Fool Stock Advisorrecommendation. To find out why, check it out free for 30 days.

Longtime Fool contributor Selena Maranjian owns shares of Chico's. The Motley Fool has a full disclosure policy.

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