Robinhood now offering 1% match on IRA savings — what you need to know

Robinhood app — how it works and everything you need to know
(Image credit: NurPhoto/Getty)

Saving for retirement can be more difficult than it sounds. But a new program launched by Robinhood gives you another potential way to set aside money for the future.

That's welcome news since it's harder than ever for many people to find ways to build up their savings. According to Morgan Stanley research (opens in new tab), 62% of people said they found it difficult to save in the face of high inflation, while almost half of American workers (opens in new tab) told a Transamerica Center for Retirement Studies survey that they didn’t have enough income to afford to retire. Although many employers match their employees 401k contributions, nearly half of American workers aren’t covered by a retirement plan. 

In 2019, almost 57 million Americans (opens in new tab) resorted to freelance jobs to make ends meet. While many of these jobs let individuals work during the Covid-19 pandemic and put extra cash in their pockets, they typically didn’t offer any employee benefits, including retirement plans. This lack of access to a retirement plan is a huge hurdle for many individuals — a Pew Charitable Trust survey (opens in new tab) found that three-quarters of people responding take advantage of retirement savings programs when they're offered.

And that's what Robinhood is doing with its new Robinhood Retirement program. The financial services company is offering a 1% match to users who save in an IRA on the platform. 

With Robinhood’s IRA plan, you’ll be able to take advantage of retirement benefits outside of the workplace. It’s a great way for gig workers or those with multiple jobs not covered by a company-sponsored retirement plan to receive a match on their savings.

An IRA is a retirement savings account that allows you to save in a tax-advantaged way. Unlike 401(k)s, which are offered through employers, these accounts are set up with a financial institution. There are two main types of IRAs that allow you to save with tax-free growth or on a tax-deferred basis — Traditional IRA and Roth IRA. Traditional IRAs use pre-tax money, meaning you’ll pay taxes on the money when it’s withdrawn from your account. Roth IRAs, on the other hand, offer tax-free withdrawals, because you’ll have to pay taxes on contributions. 

This feature is designed to provide long-term retirement savings for users, so in order to keep your match, you’ll need to keep your retirement savings with Robinhood for at least five years. Right now, you can enroll in the waitlist for the program, which offers access on a rolling basis. Full availability is slated for January. 

Unfortunately, Robinhood’s match is quite small compared to most retirement matches. The average employer 401(k) match is around 3.5% (opens in new tab), with some employers offering rates even higher, such as 6% matches on contributions. While all investments add up over time, this still isn’t a very impressive rate.

However, it is motivating many to save more for retirement. Data shows that if a match is offered, regardless of how much it is, savings and participation in plans goes way up (opens in new tab)

To get started, you’ll need to choose between a traditional IRA or Roth IRA, build a custom investing portfolio and make an IRA instant deposit. Sign up for the waitlist (opens in new tab) and find more information on Robinhood’s website (opens in new tab)

Erin Bendig
Staff writer, personal finance

Erin pairs personal experience with research and is passionate about sharing personal finance advice with others. Previously, she was a freelancer focusing on the credit card side of finance, but has branched out since then to cover other aspects of personal finance. Erin is well-versed in traditional media with reporting, interviewing and research, as well as using graphic design and video and audio storytelling to share with her readers.