Is my CD safe if the company goes bankrupt?

Q: My husband and I are in disagreement.

A large part of our retirement money is tied up with a financial company's CD products. We were attracted to their large interest rates and they are FDIC-insured.

The company is now threatening bankruptcy. Is it better to quickly close out our CDs and pay the penalty or wait until the bank goes bankrupt -- and then apply for payment through the FDIC?

It is my understanding that we will only be reimbursed by the FDIC with the CD principal and not the interest, so either way we will lose money.

A: As long as you're sure you have FDIC-insured deposits, and not some other kind of "IOU" your money is fully guaranteed -- up to $100,000 INCLUDING interest. Period. You don't have to take a penalty to get out now. And in case of a failure of the company, the commercial lending side, you would not have to "apply" for your money. Those insured deposits would automatically be transferred to a newly created (or another existing) FDIC-insured institution, with the same terms and conditions as your existing CDs.

Terry Savage is a registered investment advisor and the author of the newly published The Savage Number: How Much Money Do You Need To Retire? (256 pages, Wiley, $24.95).