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Robinhood Markets (HOOD) attempted to translate its success from the pandemic stock trading fervor into a long-term, sustainable business when it launched Robinhood Retirement in Q4 2022. Now, the discount broker-dealer is turning up the heat on its efforts to pull the retirement savings of a new generation in a unique way — by paying them to save.
The company’s long-awaited Robinhood Retirement product, which allows the broker’s customers to open a qualified account for the first time, recently launched with an offering called IRA Match. IRA Match promises to match 1% of any contributions made to a user’s Individual Retirement Account (IRA) or Roth IRA.
IRA Match has since expanded to include rollovers from qualified accounts, including 401(K)s. And in their latest earnings report, Robinhood added a sweetener for some of their most ardent customers — members of the Robinhood Gold subscription program will now receive a higher match on contributions into Robinhood Retirement.
Robinhood’s New Retirement Offering for Gold Members
Gold is a monthly subscription offered by Robinhood, which includes higher interest on cash balances (4.9% as of Aug. 20, 2023), lower margin rates, Level II market data, and market research courtesy of Morningstar.
In August, during Robinhood’s Q2 earnings call, the company announced a new benefit for Gold users: Instead of a 1% match on Robinhood Retirement contributions, Gold members would get a 3% match, effective immediately. The increased percentage doesn't apply to rollovers, which still receive a 1% match for the foreseeable future, but it's a powerful incentive for the 1.1 million Robinhood users already paying $5 per month for Gold.
By contributing at least $2,000 to a Robinhood IRA or Roth IRA, Gold users would cover their subscription cost for the year via matching funds — and they could receive up to $195 in total from the IRA Match by simply maxing their retirement account contributions ($6,500 in 2023.)
In other words, Robinhood will effectively pay its users to get Gold and put money in their retirement product. From there, it's easy to glean the benefits of having a qualified account.
That said, you’ve probably already grasped by now that taking advantage of this offer and getting the match requires making a longer-term commitment to Robinhood as a platform. Specifically, deposits and rollovers will have to stay at Robinhood for at least five years to vest.
How Does Robinhood Retirement bode for the company’s future?
Robinhood’s efforts in this space have yielded nearly a billion dollars of IRA assets to date, per second-quarter results — and since users remain eligible for IRA Match only by keeping their deposits at Robinhood for a period of five years, this deposit growth bodes well for the broker-dealer's user base.
This new addition might also boost adoption of the company’s Gold subscription product, which already has more than 1.1 million users. Users who want to take advantage of the 3% IRA Match have to remain subscribed for up to a year in order to fully vest the higher-value match — but since the Match itself helps pay for Gold in an indirect way, this shouldn’t be a problem.
Ultimately, IRA Match and Robinhood Retirement represent one way that Robinhood has taken a longer-term strategy on its product. The days of hefty meme-stock volumes and massive retail participation in crypto that helped frame the broker-dealer as a trading king during COVID are over, and so are the hefty profits that helped bring HOOD to the stock market.
There’s still a lot of opportunity, though. Robinhood has shown that it has an appetite to attract and retain high-quality customers with its brand marketing efforts, such as IRA Match — and with plans to expand into new markets like the U.K. on the horizon, as well as an advisory product, there’s still plenty of growth potential for the company that revolutionized stock trading.
On the date of publication, Noah Weidner did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
