Do You Have an IRA? These 2 Brokers Will Pay You to Save for Retirement
If you don’t have a retirement plan at work, or if you contribute to an individual retirement account (IRA) in addition to your employer’s plan, one of the biggest drawbacks you face is no employer matching contributions into your retirement savings.
There are a couple of innovative investment platforms that are looking to help solve this pain point. While these matching bonuses aren’t likely to be as generous as those offered in the typical 401(k) plan, you might be surprised at how much of a difference they can make over the long run.
Robinhood: The pioneer of IRA matches
Robinhood has historically been known as a trading (not investing) platform, but the company has evolved significantly in recent years. It introduced IRA investing in late 2022 and immediately received lots of attention for its unique matching feature, which was essentially a 1% bonus on IRA investments.
The 1% bonus applies to both new IRA contributions as well as transfers and rollovers from other retirement accounts.
Robinhood Gold members, who pay a $5 monthly subscription fee, get a higher 3% matching rate on IRA contributions, which can justify the value of the premium membership all by itself. Normally, the 3% rate is only for new contributions, but until April 30, it applies to rollovers and transfers as well, which can be a big bonus for people with large accounts at other institutions. For example, if you have a $100,000 401(k) balance from an old employer, you can get a $3,000 bonus just for moving it to a Robinhood IRA.
Robinhood requires you to hold your investments in an IRA for five years before withdrawing the matching bonuses, which should encourage IRA customers to invest for the long term.
SoFi can be a great all-in-one financial platform
SoFi also offers an app-based investment platform, but it’s designed to be more of an all-in-one financial institution than Robinhood is. In addition to its brokerage platform, SoFi has a robo-advisor, checking and savings accounts, credit cards, a variety of installment loans, and more.
Not to be outdone by a competitor, SoFi started matching 1% of its customers’ IRA contributions, including new ACH contributions as well as rollovers or transfers from other retirement accounts. While this is the standard matching rate, SoFi announced earlier this year that it would double its matching rate to 2% for contributions made before the April 15 tax deadline (only for new contributions, not transfers), and unlike the Robinhood Gold rate, there is no membership required to get it.
To get SoFi’s bonus, the money needs to stay in the account for at least 180 days, which is a fairly short vesting period, especially compared with Robinhood’s five-year requirement.
These can really add up over time
Both of these are solid investment platforms and are likely to appeal to different types of investors. The best course of action is to explore both platforms and read our reviews of each (linked earlier in the article) to see which might be best for you.
Finally, while these bonuses might sound rather small, don’t overlook the long-term compounding power. For example, let’s say that you max out your IRA contribution ($7,000) in 2024 and you’re a Robinhood Gold member. This would get you a $210 matching bonus.
However, when compounded over the long term, you might be surprised at what a difference this could make. That $210 growing at the stock market’s historical average rate of return (about 10% annually) would grow to nearly $3,700 after 30 years. Now imagine if you got a bonus every year. This could make a significant difference in your financial security in retirement.
To be sure, there is more than a contribution bonus to consider when deciding on the right brokerage for your IRA. However, If Robinhood or SoFi meet your needs, using one of them for retirement savings can give you a big boost over the long run.
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