Is Vanguard FDIC Insured?
Vanguard offers SIPC protection for brokerage accounts, and some eligible Vanguard cash balances can also receive FDIC insurance through Vanguard’s bank-sweep option. Here’s how it works:
Vanguard’s main investing accounts are brokerage accounts. It is not a bank, so standard Vanguard investment balances are not bank deposits.
The FDIC protects deposits held at banks. At Vanguard, eligible clients can use Vanguard Cash Deposit, which sweeps cash to participating program banks where it is eligible for FDIC insurance.
Securities held in a Vanguard brokerage account are eligible for SIPC protection up to $500,000. Up to $250,000 of that amount can apply to cash claims.
Calculating SIPC Coverage at Vanguard
SIPC protection is generally based on each customer’s separate capacity at a brokerage firm. That means you can expand coverage by holding accounts at different brokerage firms, although multiple accounts in the same capacity at one firm are usually combined. There are exceptions to this rule, however.
For instance, under SIPC rules, IRAs are treated separately from taxable accounts. Roth IRAs and Traditional IRAs are also treated as separate capacities.
If you have 2 IRAs at Vanguard (one Roth and one Traditional) and 2 taxable individual accounts, you would have a total of $1.5 million of insurance. The retirement accounts would have a total of $1 million of protection ($500,000 for the Roth, and another $500,000 for the Traditional), and the taxable accounts would have another $500,000 (but not $500,000 for each).
But if one of the taxable accounts is a joint account, it would have its own $500,000 limit, which would produce $1 million in total insurance for the taxable accounts.
Vanguard And Top Competitors
Money Market Settlement Fund
Vanguard can use a settlement fund as the core cash position in a brokerage account. Cash in the account may be held either in Vanguard Federal Money Market Fund (VMFXX) or, for eligible clients who choose it, Vanguard Cash Deposit.
When cash is held in the settlement fund as VMFXX, it is treated as a security for SIPC purposes, so it falls under the $500,000 SIPC limit instead of the $250,000 cash sublimit. It is not treated as bank cash, even though it is commonly used as a cash-equivalent position, and the fund’s NAV is expected to stay at $1.00 under normal conditions.
Vanguard currently offers 2 settlement fund choices for eligible brokerage clients: Vanguard Cash Deposit and Vanguard Federal Money Market Fund (VMFXX).
Account Example
To show how SIPC protection could work at Vanguard, assume you have a taxable brokerage account with $600,000 in assets. The portfolio is split up this way:
$230,000 in Tesla stock
$70,000 in GLD, the gold ETF
$300,000 in VMFXX, the settlement fund
In the very unlikely event that Vanguard filed for bankruptcy and account positions were missing, the entire account would not be guaranteed by SIPC. Only 83.3% of the account would be protected ($500k/$600k). The entire settlement fund, not just $250,000, could be defended, but $100,000 of the account value would be left unprotected, at least by SIPC.
Keep in mind that the holdings in the account legally belong to the account owner, not to Vanguard, so if Vanguard ever did go bankrupt, creditors would not have a claim on those assets. SIPC protection exists in case assets are missing from customer accounts. In the securities industry, that does happen on occasion.
Supplemental Insurance at Vanguard
Vanguard also maintains an extra insurance policy that adds another layer of protection for brokerage assets after SIPC coverage is exhausted.
The secondary insurance policy is good for up to $49.5 million per account. There is an aggregate maximum of $250 million. That means the insurance policy will shell out a quarter of a billion dollars at most across all accounts that have maxed out SIPC coverage.
Going back to our example, the $100,000 of account value that is unprotected now should be protected by the supplemental insurance policy, assuming the aggregate limit is not exhausted. After that point, there are no guarantees.
Written by Alex Bost
Updated on 4/22/2026.
|