Robinhood launches retirement accounts for gig workers

Robinhood, the company that made a name for itself on Wall Street after turning millions of novices into investors by making trading fun, is now turning to a quieter corner of the industry: saving for retirement.

The company is launching enrollment in a retirement program on Tuesday, where customers can accumulate savings in an individual retirement account, better known as an IRA.

It’s the first effort of its kind for Robinhood, which is trying to recapture some of the high-flying growth that plummeted as painful downturns made day-trading stocks and cryptocurrencies much less fun.

Robinhood has often attracted younger customers, and many of them are in jobs that don’t have access to a traditional 401(k) retirement plan offered by an employer, said Vlad Tenev, chief executive of Robinhood.

These 401(k) accounts have helped inspire millions of Americans to save for retirement, with many workers automatically enrolled by their employers. But many Robinhood customers are in sectors of the labor market that don’t have the luxury of such programs.

“Today you see an increasing number of people working on contract, part-time, in a gig economy,” Tenev said in an interview. “They just don’t have access to it. We wanted to bring this to everyone, no employer needed it.

Robinhood promises to match 1% of qualifying contributions customers make to their IRA. That could mean up to $65 for someone who contributes the maximum allowable $6,500 to an IRA next year. People aged 50 and over can contribute up to $7,500 in 2023.

Early enrollees will have access to Robinhood IRAs over the next few weeks, with the program becoming fully available in January.

A retirement program is something Robinhood customers have been asking for for a long time, Tenev said. And that’s something that could dramatically boost Robinhood’s results.

Retirement savers may be less inclined to move between different brokerages, and retirement savings offer a huge potential market.

Total retirement investments in the United States totaled $33.7 trillion this summer, according to the Investment Company Institute. They represent 31% of all household financial assets. IRAs make up the largest portion, at $11.7 trillion.

Robinhood’s growth has slowed sharply since its popularity took off during the pandemic. Its stock has fallen around 45% this year and is below $10 after hitting a high above $70 shortly after its stock market debut in the summer of 2021.

Its growth peaked in the first half of 2021, when the new generation of investors it helped convert were a major factor in the meme-stock frenzy that propelled GameStop and others to heights impacting the the market.

But the meme stocks craze has since died down. The same goes for crypto trading, another big source of income for Robinhood.

One of the reasons for GameStop’s explosion was the number of traders at Robinhood and other brokerages using stock options to ride the wave. In some cases, trading options can increase the possible reward if a trader is right, but can also increase risk.

Tenev said retired Robinhood customers won’t be able to trade options in their IRAs, as some other providers allow, at least not yet.

“Day 1, they won’t,” he said. “It will only be stocks and ETFs. We will review the comments and look to add assets. »

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