Does Robinhood Have IRA Or Roth IRA Options? 


Does Robinhood Have IRA Or Roth IRA Options? 

Last updated on September 1st, 2022 at 01:46 pm

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Robinhood has long been known as one of the most popular platforms to set up an investment account, mainly due to its no-fee trading app. Given its pocket-friendliness, anyone can easily be tempted to set up a retirement savings plan on the platform. 

Robinhood App For Beginners - Pros...
Robinhood App For Beginners - Pros & Cons And How It Compares

But is that even possible?.

Robinhood doesn’t currently offer Traditional IRAs, Roth IRAs, or any other type of retirement accounts. However, the company is considering launching IRAs, Roth IRAs, and possibly other retirement accounts such as SEP and SIMPLE in the future. 

In the rest of this post, I’ll provide more details on Robinhood’s stance on retirement accounts and whether you can transfer assets from the platform to an IRA/Roth IRA. I’ll also identify an alternative platform that offers retirement accounts, so be sure to stick around to the end.

Does Robinhood Offer Roth IRA/IRA?

Typically, the company only provides taxable brokerage accounts. That means if an individual were to invest their money long-term on the platform as means to save up for retirement, they’d miss out on the tax benefits that typically come with IRAs and Roth IRAs. 

Robinhood doesn’t currently offer any retirement accounts. You can’t open any individual retirement account with this broker, whether it’s a Roth IRA, a Simplified Employee Pension (SEP) IRA, a traditional IRA, or a Savings Incentive Match Plan for Employees (SIMPLE) IRA.

What’s more, you won’t have access to most mutual funds and bonds because the platform doesn’t allow these. However, you can invest in ETFs on Robinhood. 

For many investors, bonds and mutual funds are critical elements of a retirement nest egg because they help with diversification, among other benefits.

However, Robinhood’s stance on IRAs and Roth IRAs might soon change. 

As reported by Reuters, Robinhood Market Inc Co-founder and CEO Vlad Tenev recently revealed that the company is considering allowing retirement accounts for its US customer base. The move will help both users of the Robinhood app and the brokerage.

Offering IRAs and Roth IRAs would allow consumers to enjoy the tax benefits of these retirement plans through a true discount broker. Robinhood has long been known for its pocket-friendliness thanks to its lack of account minimums and commission-free stock trading. 

If that kind of cost-effectiveness is extended to tax-advantaged Roth IRAs and IRAs, consumers would certainly benefit.

For Robinhood, opening doors to IRAs and Roth IRAs represents an avenue into an untapped market. Millennials are saving more than ever, and allowing retirement accounts on their app would be a great way to tap into this habit.

Offering retirement accounts can also help the company attract more long-term investors. People typically turn to Robinhood for short-term investments, partly due to the types of assets allowed on the platform.

Since withdrawing money from a retirement plan often attracts penalties, people who set up IRAs and Roth IRAs are in it for the long run. So by allowing these account types, Robinhood can potentially attract more long-term investors.

Can You Transfer Robinhood Assets To An IRA/Roth IRA?

If you already have a Robinhood account, you may have assets in your name that you’d like to transfer to an IRA/Roth IRA (set up with a different broker) since the platform doesn’t allow retirement plans. But is that even possible, or do you have to start from scratch with your retirement plan?

You can’t transfer funds and investments from your Robinhood account to an IRA or Roth IRA. That goes for all kinds of transfers, including a direct transfer. 

The reason this isn’t possible is that the account you currently have with Robinhood doesn’t qualify as a retirement plan. 

Understand that this rule doesn’t only apply to Robinhood accounts. Regardless of your broker, you can’t convert a conventional investment account to a retirement account. That goes for rollovers, too. 

Typically, rollovers and conversions are only allowed between retirement accounts. And even then, you may be limited in the types of transfers you can make. 

For more details on this, check out the IRS’s Rollover Chart.

With rollovers and conversions out of the picture, you’re left with only one way to transfer the holdings of your investment account to a retirement account. That is, selling your investments and contributing the proceeds to a retirement account, as opposed to transferring money directly from the investment account to an IRA/ Roth IRA. 

Keep in mind that doing this may trigger a tax bill.

A Robinhood Alternative That Allows IRA/Roth IRA

Given that Robinhood doesn’t offer IRA/Roth IRA, you’ll naturally want to look for alternatives if you were looking to set up a retirement plan on the platform. Fortunately, finding a brokerage that offers these two types of retirement plans isn’t too hard一In fact, you’ll likely have plenty of choices.

The trick is to find a platform that shares Robinhood’s pocket-friendliness because that’s probably what attracted you to the platform in the first place. Specifically, you’ll want to keep an eye on monthly maintenance charges, annual fees, rollover transfer fees, and commissions on ETFs, stocks, and stock options. 

It also helps to choose a platform that provides other retirement accounts beyond IRAs and Roth IRAs.

If I had to choose, I’d go with Ally Invest because it ticks all of these boxes. It offers a variety of investment accounts, including:

  • Traditional IRAs
  • Rollover IRAs
  • Roth IRAs
  • Coverdell Education Savings Account (ESA)

None of these retirement accounts charge monthly maintenance fees, rollover fees, or annual fees. No commissions are charged for ETFs, stocks, and stock options listed on a US stock exchange.

And while fees may be charged for certain account activities such as closures, they’re nothing out of the ordinary. 

Expect to pay $25 for an IRA account closure and $50 for a partial account transfer. If you’d like to close your IRA and transfer all your funds to a different account, you’ll be looking at $75 in charges, which comprises the 25-dollar account closure fee and the 50-dollar account transfer fee.

Final Thoughts

Before I conclude, let’s do a quick round-up of everything that I covered. We’ve established that Robinhood only offers taxable brokerage accounts. It doesn’t offer any retirement accounts currently, including IRA and Roth IRA. 

However, the company is looking into launching retirement accounts for its US customer base in the future. 

Regarding transfers, you can only move your Robinhood assets to an IRA/ Roth IRA by selling them and then contributing the proceeds to your retirement account. Direct transfers aren’t allowed. 

Lastly, you might want to look into Ally invest if you want a platform that allows retirement accounts with Robinhood’s pocket friendliness.

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