With an eye fixed 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 excited by placing cash into its IRA plans. Together with its common promise of not charging commissions, Robinhood is pledging to offer a 1% match for each greenback contributed to considered one of 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 yr for an employer who provided no retirement plan. The identical survey, cited by Robinhood in help of its IRA providing, discovered that 77.5% of the respondents had taken half in employer-sponsored plans once they have been provided and practically seven in 10 needed entry to such a plan. PEW has additionally discovered that wherever from 3.8% to 40% of U.S. adults are present or current members within the gig financial system, relying on what definitions of non-traditional work apply.
“We imagine that saving for retirement ought 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 extensively accessible from firms like Constancy Investments, The Vanguard Group and comparable companies. However employer-sponsored 401(okay)s stay some of the widespread methods to save lots of for retirement. The business and lobbying group Funding Firm Institute has reported that $7.3 trillion was held in 401(okay)s by June 30, 2021, roughly a fifth of People’ whole retirement financial savings. About 60 million folks have been members in these plans.
Robinhood made waves within the investing world in 2015 when it launched its on-line brokerage service permitting purchasers to purchase and promote shares and different securities with out paying commissions. Rival companies 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 towards conventional brokerages for funding {dollars}. Prospects who enroll will have the ability to select between a normal IRA and a Roth IRA. Conventional IRAs enable members to contribute as a lot as $6,500 — $7,500 for folks 50 or older — of their pre-tax earnings subsequent yr and defer paying taxes on that cash till after they retire. Withdrawals are then taxed at unusual 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 clients to spend money on shares and exchange-traded funds, which observe particular person indexes or commodities and commerce like shares. The funds Robinhood affords will observe the whole lot from firms 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 provide.
Robinhood additionally plans to finally let IRA traders put cash into inventory choices, which give traders the best to promote a inventory at a set worth 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 standard IRA. Purchasers will have the ability to select investments themselves or search suggestions by Robinhood’s on-line portfolio builder.
Prospects who now join Robinhood’s IRA accounts will acquire entry to them over the approaching weeks. This system shall be totally up and operating by January. Prospects who refer associates to Robinhood’s IRA plan waitlist shall 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 Information reported that just about half of its income was coming from so-called “funds for order move,” by which Robinhood sends data on purchasers’ inventory traded to particular brokers in alternate for small funds. The follow has drawn scrutiny from regulators due to issues 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 somewhat 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 firms focused in a so-called “brief squeeze” — an try to drive up their inventory costs to punish hedge funds and different traders who had guess the worth would as a substitute fall. Robinhood stated it needed to halt the buying and selling to fulfill collateral necessities.
