Robinhood goes after retirement dollars

Online brokerage Robinhood and its gamified trading app are going after retirement accounts.

The fintech company launched its first retirement offering Tuesday, allowing a small number of existing customers to open individual retirement accounts on its platform and starting a wait list for others.

Robinhood Retirement, aimed at gig-economy workers, will match 1% of a customer’s contributions up to the allowed limit (in 2023, that’s a total of $6,500 for savers under age 50). Users need to keep the funds invested for five years to avoid a possible fee upon withdrawal.

In a faint echo of the brokerage app’s referral program, which rewarded users with fractional shares of stock for getting others to join, a customer on the wait list can get earlier access if they recommend another customer who opens an account. Accounts must be funded with external money.

Those opening an IRA can invest in a recommended basket of exchange-traded funds developed by Robinhood’s head of investment, or pick their own mix of stocks and ETFs. Robinhood said the recommended mix of ETFs is based on factors including the user’s age, time horizon, main goal (growth or preservation), risk tolerance and level of desired return. The ETFs have an average expense ratio of about 0.04% or 0.05%.

“We have a significant amount of buy-and-hold customers, and while this product has broad applicability, it was definitely designed around their needs,” said Sam Nordstrom, Robinhood’s manager of product management.

For now, putting crypto in your IRA is not an option, the company said. 

Robinhood is known more for rapid-fire trading than buy-and-hold investing. After introducing millions of novice traders to the stock market during the pandemic, declines in stocks and cryptocurrencies amid rising interest rates have made keeping up the momentum a challenge. A decline in trading activity has hurt revenues, although transactions rebounded slightly in the third quarter.