Open an IRA Here, and You Get a 1% Match on Contributions

Most of us wish we could save more for retirement. Now, Robinhood wants to lend a helping hand.

The financial services company is offering to match 1% or more of its customers’ IRA contributions.

Up to now, Robinhood has primarily served as a securities trading app. It became popular during the COVID-19 pandemic as younger investors turned to the app to make trades during the frenzy surrounding meme stocks.

However, in 2023, Robinhood began to offer both traditional and Roth IRAs. Now, Robinhood is matching contributions at 1% up to the annual investment limits established by the IRS.

Those who pay $5 monthly for the firm’s premium account option — known as Robinhood Gold — get a 3% match.

For the 2023 tax year, IRA savings limits are $6,500 for those under 50 and $7,500 for those 50 and older. For 2024, they are $7,000 and $8,000, respectively.

That means a maximum 1% match of either $65 or $75 for 2023, depending on the account holder’s age, and either $70 or $80 for 2024.

The 3% match would be a maximum of either $195 or $225 for 2023, depending on age, and either $210 or $240 for 2024.

Even better, the matched money is treated as interest income, according to a Wall Street Journal report. That means it will not count toward your annual contribution limit.

IRA transfers and 401(k) rollovers also earn a match of 1%. There is no higher match on transfers and rollovers for Robinhood Gold members.

If you choose to take advantage of the Robinhood match, there is one important caveat: The funds must remain in the IRA for at least five years.

Robinhood says that as of the beginning of October 2023, the company had opened 325,000 funded IRAs. But is this the right move for you?

Some financial professionals told The Wall Street Journal that the Robinhood offer should be approached with caution. They note that investment options might be limited at Robinhood.

In addition, some pros told the WSJ that they worry folks might be tempted to succumb to Robinhood’s reputation as a place to make speculative trades.

But even with those concerns in mind, John Sabelhaus — a senior fellow at the Brookings Institution in Washington, D.C. — told the WSJ that if the Robinhood offer “gets younger people to save more, then that is a good thing.”

Unsure of whether a Robinhood account makes sense for you? Stop by the Money Talks News Solutions Center and find a financial adviser who can help you craft the right financial plan for your circumstances.