The day is finally here. Robin Hood announced on December 6th that they will be rolling out retirement accounts. They also announced that those types are going to be either a traditional higher rate or a Roth IRA.
I believe this is really big for Robin Hood. I feel like it’s definitely way overdue. Having these types of accounts are very tax efficient, whether you want to lower your taxable income today or whether you want to pay the taxes today and receive the income tax free later. They can both be great options.
Robin Hood also announced they are implementing a 1% match program. This is really interesting; I haven’t seen any of the other brokers out there offer anything like this. Hopefully the other brokers will follow suit and start to implement some of the same things. If you max out your account and contribute $6,000, they will give you a bonus of 1% or $60.
| Contribution | Match Bonus – 1% |
| $1,000 | $10 |
| $2,000 | $20 |
| $3,000 | $30 |
| $4,000 | $40 |
| $5,000 | $50 |
| $6,000 | $60 |
These types of retirement accounts do have a maximum contribution limit. Which is $6000 if you’re under the age of 50 and $7,000 if you’re over the age of 50. They also have income limits. If you’re a single filer and make more than $144,000 in 2022, then you cannot contribute to a Roth IRA. If you’re married and file jointly the income limit is $214,000.
As always, these laws can change, so be sure to do your own research if that happens and use the data provided today for educational purposes only.
So, if you don’t have retirement accounts started, the best time to start those are today. Traditional IRAs and Roth IRAs are great retirement accounts that individuals can start outside of their typical 401K’s and other retirement options.
Just to recap, Traditional IRAs go in pretax, meaning that every dollar that you invest will lower your taxable income for this current year. Roth IRAs go in after tax, meaning that they will go in after tax, grow tax free and when you withdraw it will be tax free, whereas Traditional IRAs go in pre-tax, and taxes will have to be paid for when they come out.
Hope this was helpful. This is very big news for Robin Hood like I mentioned before. Retirement accounts are important to have and hopefully this will help their users start to save more for retirement. I think it’ll be very interesting to see how the Robin Hood retirement match program plays out. It will be interesting to see if other financial exchanges will implement something similar to compete with Robin Hood.
