Wednesday, February 14, 2024

How to Earn a 3% IRA Match with Robinhood

The employer match is one of the best features of workplace retirement accounts such as 401 (k) plans ( Pre-tax and Roth). It’s a contribution from the employer into the employee workplace retirement account. It’s as close to as it gets to “Free Money”, albeit it is all part of total compensation.

Online broker Robinhood is having an interesting promotion, related to retirement accounts. 

They basically offer a match on retirement contributions and asset transfers of up to 3%, with no limits. The IRA match doesn't count toward your annual contribution limit, which means it’s extra money on top of your contributions. You can earn the IRA match on all new IRA contributions, IRA transfers, and 401(k) rollovers. In addition, the bonus is simply added to your retirement account, which does not generate a taxable event.

There are some hoops one needs to jump through however, in order to get that bonus.

1.      Robinhood clients need to sign up for Robinhood Gold, which costs $5/month. The bonus requirement is that the client is an active Robinhood Gold user for at least 12 months.

2.      Robinhood clients need to transfer an old Roth IRA from another broker into Robinhood in order to be eligible for the 3% match on transfers. Examples include transferring assets from a broker like Merrill Edge into Robinhood. This can all be done electronically from the Robinhood interface.


This offer also applies to regular contributions, which are subject to the annual contribution limits. For example, contributing $7,000 to a Roth IRA at Robinhood makes the customer eligible for the 3% match on said contribution. Provided of course that the customer has signed up for Robinhood Gold.


3.       The offer ends April 30 on the asset transfer bonus from another brokerage.

4.      The catch is that there is a 5 year holding period for asset transfers from another brokerage. In other words, those assets that have been transferred into Robinhood need to stay at Robinhood for 5 years. Otherwise, the client forfeits that bonus.

When the IRA transfer completes, the amount of the match is calculated based on 3% of the total of the transferred cash plus transferred securities and options, using the National Market System closing price of each position transferred into the account on the trading day before when the transfer settles.

Robinhood would also reimburse any transfer fees up to $75, assuming that at least $7,500 are transferred over from another broker.

For IRA transfers it typically takes 5-7 business days for the transfer to be completed in the Robinhood account, after they receive an account transfer request. For 401(k) rollovers, this process can typically take 2-4 weeks for deposits to complete.

A rollover is not always the best choice for old 401 (k) accounts too. In some cases it may be beneficial to keep the money in the 401 (k). Perhaps speaking to a licensed financial professional can help weigh options.

Overall, I believe it sounds like an interesting offer. This is obviously an attempt from Robinhood to get more retirement assets in their brokerage business. Retirement assets are stickier, which can potentially increase customer lifetime value and profits for Robinhood.

It is a very good offer, which may or may not be a sign of desperation on behalf of Robinhood.

The brokerage business is very competitive, and very commoditized as well. There is a risk that a broker may fail. This is why it is important for investors to be aware that they are only protected up to the first $500,000 per account type per broker through the SIPC, should that broker fail. That means it’s probably not smart to keep all assets at one brokerage to begin with as it could take time for assets to be given back to customers for example.

If Robinhood were to fail or be acquired by someone else, it is unclear if they would claw back that bonus money or let the customer keep it.

I do not have a clue if Robinhood would fail or be in business in 5 years. That’s just my opinion of thinking through the risks potentially associated with this return.

These are some of the risks I thought about in an effort to list pros and cons.  

This is not an affiliate or paid post. I am just trying to determine for myself if it makes any sense to move some assets to Robinhood and take advantage of this offer. 

This is their FAQ section on the offer.

These are screenshots from the Robinhood app, which inspired me to review this deal.


 It could take some navigating on the app to find this deal however.




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