Robinhood (NASDAQ:HOOD), has announced the availability of its new retirement product. The new service was revealed last year, and the digital brokerage launched a waitlist with names now said to be over 1 million customers. Perhaps the most interesting aspect of the retirement product is the IRA will offer a 1% match for each dollar contributed to the account.
While it is typical for employer-offered retirement services to provide some sort of a match – this is probably the first time a non-employer provider has done the same.
Robinhood reported that many of the individuals on the waitlist were “gig economy workers” working at places like Uber or as self-employed.
Baiju Bhatt, Robinhood co-founder and Chief Creative Officer, stated in a release that a quiet retirement crisis is brewing and they see an opportunity to provide a solution building “products that adapt to the way work and savings will evolve, and ensure people have the tools to control their financial future – just like the way we started.”
With Robinhood Retirement, customers can open multiple Robinhood brokerage accounts for the first time and can immediately start earning a 1% match from Robinhood on every eligible contribution dollar. Contributions must come from an external source, and the match is capped at the annual IRS limits for contributions. The customer must keep the funds that earned the match in the account for at least five years to avoid the possibility of a fee when withdrawn.
Earnings can grow either tax-free or tax-deferred, which means customers will save on taxes while saving for their future – an added tax benefit even if they already have a 401k elsewhere.
In a blog post, Bhatt addressed the savings crisis and how it compelled Robinhood to create its retirement product. He said “systems are failing to catch up to the needs of how many people live and save (or don’t). While it’s most acute in retirement, planning for the future feels increasingly out of reach for the modern worker – we believe many are simply being left behind.”
Bhatt shares they even traveled to middle America – Cincinnati, Ohio, to gather feedback and perspective on the problem. Among other issues, giga high inflation and the reality that many people have multiple jobs and or careers over their life, making it more difficult to save for retirement.
“In a study by MBO Partners, 73% of those working independently on a part-time basis are doing it to supplement income, particularly in light of inflation. In addition, 63% of the workers surveyed said it was their choice to work independently. By choice or by circumstance, the way people are earning a living is changing.
Taking this further, the shift also means the way people are employed won’t match up to the way they usually access benefits – through a traditional employment structure. What happens then, if important benefits are tied to a less prevalent single employer lifestyle? Those benefits should follow you to any employer or source of income, not be tied to a company.”
Bhatt said that with historically high government debt, it’s clear that saving for the future has become more important than ever. Enter Robinhood Retirement.
Shares in Robinhood are little changed on the news in choppy trading.