Robinhood IRA: 1% Bonus Match on Retirement Contributions

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I have to hand it to Robinhood, they are good at marketing. It took years, but Robinhood is finally offering Individual Retirement Accounts (IRAs) with the unique feature of giving you an extra 1% on every dollar you contribute, every year. Traditional and Roth IRAs are available. The 2022 IRA contribution limits are $6,000 ($7,000 if you are age 50+), which means a bonus of up to $60-$70 annually. Right now, you have to sign up on their waitlist, with actual rollout in January 2023. If you wait until then, you could do both your 2022 and 2023 contributions in early 2023.

Some important items after reading through their IRA Match FAQ:

  • Make sure you make your IRA contributions from a linked external bank account only up to the annual IRA contribution limits. Contributions from your Robinhood brokerage or spending accounts don’t earn the IRA Match. Rollovers don’t count either.
  • You must keep the funds that earned the match in the account for at least 5 years to avoid the possibility of a clawback fee when withdrawn.
  • IRA Match counts as interest income in your IRA and doesn’t count toward your annual IRA contribution limit.
  • Outgoing $100 ACAT transfer fee applies if you transfer to another broker later using Automated Customer Account Transfer Service. This fee is currently set at $100.

I’m a little conflicted about this. On the one hand, IRA contributions are so limited and precious, it would be nice to effectively put in a little extra and have it grow tax deferred for 20-30 years, even if it is only about $60 a year. On the other hand, IRAs have more paperwork requirements and I don’t know if I trust Robinhood’s barebones customer service to properly deal with my annual “Backdoor” IRA conversions and such.

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Comments

  1. i agree. Great marketing. Kind of a nice way to get meme stock/younger investors into the IRA mindset.
    As a more experienced investor, nope. Giving back a year and a half of a match to transfer money out doesn’t sit right with me. If you transfer before a year, you’ll wouldn’t even have made the match yet to cover it. Feels like those Raymond James type places that make it impossible and expensive to leave without fees and taxable events because they put you in proprietary funds with no equivalent at a low fee broker. When there are barriers to leaving, it’s a red flag to me.
    Congress just needs to up the limit on that account. Shameful everything but that was adjusted for inflation.

  2. With less than ten years to retirement, I’m not the market for this. Although I’ll admit a free 1% match isn’t bad and was eyecatching. But it’s not worth the headache of worrying f Robinhood will even be around five years from now. I wouldn’t be surprised if that transfer fee increases in five years, offsetting the 1% match.

  3. Any reputable brokerage will match this.

    Robinhood is not a reputable broker.

  4. 5 years is excessive time to be forced to keep an investment in one place. In 5 years, Robinhood itself may no longer even exist if market conditions remain this bad or worse.

    • I thought about that too but Robinhood accounts are SIPC insured so unless you have more than $500k there, you will be fine.

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