Robinhood opens waitlist for signing up for brand spanking new retirement plans

With a watch to serving to gig staff save, Robinhood Markets is broadening its suite of investing and brokerage companies to incorporate particular person retirement accounts.

The brokerage and monetary companies agency introduced Dec. 6 that it had opened a waitlist for traders concerned about placing cash into its IRA plans. Together with its common promise of not charging commissions, Robinhood is pledging to supply a 1% match for each greenback contributed to one in all its retirement accounts.

Robinhood is particularly pitching so-called gig staff and different unbiased contractors with no entry to employer-offered 401(okay) plans. In a survey of greater than 1,000 gig and different “non-traditional” staff in 2020, the nonprofit public coverage group Pew Charitable Trusts discovered that simply over half had labored the earlier 12 months for an employer who provided no retirement plan. The identical survey, cited by Robinhood in assist of its IRA providing, discovered that 77.5% of the respondents had taken half in employer-sponsored plans after they have been provided and practically seven in 10  needed entry to such a plan. PEW has also found that wherever from 3.8% to 40% of U.S. adults are present or current contributors within the gig financial system, relying on what definitions of non-traditional work apply.

“We consider that saving for retirement needs to be simple and accessible to all, and never depending on the place or how you’re employed,” Robinhood wrote in a weblog put up accompanying the announcement of its IRA plans.

Non-employer-sponsored IRA plans are already broadly out there from corporations like Constancy Investments, The Vanguard Group and comparable corporations. However employer-sponsored 401(okay)s stay some of the widespread methods to save lots of for retirement. The business and lobbying group Investment Company Institute has reported that $7.3 trillion was held in 401(okay)s by June 30, 2021, roughly a fifth of Individuals’ complete retirement financial savings. About 60 million individuals have been contributors in these plans.

Robinhood made waves within the investing world in 2015 when it launched its on-line brokerage service permitting shoppers to purchase and promote shares and different securities with out paying commissions. Rival corporations on the time had been charging wherever from $10 to $75 for every commerce.

With its mission to “present everybody with entry to the monetary markets, not simply the rich,” Robinhood is looking for to make use of its IRA providing to compete in opposition to conventional brokerages for funding {dollars}. Clients who join will have the ability to select between a normal IRA and a Roth IRA. Conventional IRAs enable contributors to contribute as a lot as $6,500 — $7,500 for individuals 50 or older — of their pre-tax earnings subsequent 12 months and defer paying taxes on that cash till after they retire. Withdrawals are then taxed at odd charges, now topping 37%. Roth IRAs have the identical contribution restrict however are made with cash that has already been taxed. Their withdrawals are tax-free.

Opening both sort of account at Robinhood would enable prospects to put money into shares and exchange-traded funds, which monitor particular person indexes or commodities and commerce like shares. The funds Robinhood affords will monitor the whole lot from corporations with a market valuation of $10 billion or extra, high-dividend shares, Treasury bonds and gold. It wasn’t instantly clear which fund households the platform will supply.

Robinhood additionally plans to ultimately let IRA traders put cash into inventory choices, which give traders the precise to promote a inventory at a set value on a predetermined date. Income from these investments will both be tax-free — in the event that they’re in a Roth account — or tax-deferred, if in a conventional IRA. Shoppers will have the ability to select investments themselves or search suggestions by means of Robinhood’s on-line portfolio builder.

Clients who now join Robinhood’s IRA accounts will achieve entry to them over the approaching weeks. This system will probably be absolutely up and operating by January. Clients who refer associates to Robinhood’s IRA plan waitlist will probably be granted early entry.

Though Robinhood has develop into a preferred means of shopping for and promoting inventory, it hasn’t been with out controversy. In October 2018, Bloomberg News reported that nearly half of its income was coming from so-called “funds for order circulation,” during which Robinhood sends data on shoppers’ inventory traded to particular brokers in trade for small funds. The observe has drawn scrutiny from regulators due to considerations that it promotes conflicts of curiosity. 

Robinhood has additionally been accused of encouraging “gamification” of the inventory market. Its commission-free buying and selling system, critics say, encourages putting frequent bets on the upward or downward motion of the market fairly than long-term investing. In 2021, Robinhood took the unprecedented step of halting buying and selling in shares within the gaming retailer GameStop and different corporations focused in a so-called “quick squeeze” — an try to drive up their inventory costs to punish hedge funds and different traders who had guess the value would as a substitute fall. Robinhood stated it needed to halt the buying and selling to satisfy collateral necessities.