so if you're a Robin Hood user you probably got a pretty interesting notification this week and
it was something that I really wasn't expecting Robin Hood came out with a a platform where you
can create retirement accounts it's not something that I've seen from them in the past and the
really big tagline of the one associated with it is that they'd have a one percent match you don't
need an employer to do the match this is kind of exciting because while I do have an employer match
it's through a simple IRA and as a result I don't have direct control over it and this you have the
ability to create a retirement account don't need an employer and Robinhood will match one
percent of their deposit so today we're going to talk about what that really means who is going to
benefit from it and if I think it's worth looking into obviously this is not Financial advice this
is just my research on what Robin Hood is doing when it comes to these retirement accounts and I
wanted to share my thoughts so let me know down below if this is something you're going to take
a look at and if you uh are deciding to switch your retirement accounts from other Brokers over
to Robinhood so at first I was pretty skeptical about this topic anytime I see a guaranteed rate
of return you see stuff with you know a lot of the crypto sites you should should get kind of
skeptical because we've been burned a lot in the past most recently with the FTX and kind of the
guaranteed rates of return so when I first saw this I was kind of skeptical I thought you were
going to get screwed in some way but the more I look into it the more legit it seems the first
question I had is whenever you have a match is it going to go against your contribution limits
for retirement accounts there is a contribution limit associated with the type of account it is
for a for an IRA it's currently six thousand and 2023 it's going to go up to 6 500 but you
know something that's worth using anytime the government limits the amount of money that you
can put into it because they don't want you to throw all of your money into it because they
don't want you to build wealth too fast so my first question is does it go against your
contribution limits and according to robinhood's website it does not so you're allowed to have
your max contribution and then on top of that the one percent match does not go against you so that
means if you're able to get it up right now you'd have to six thousand dollars that you can deposit
which would be matched one percent which would be sixty dollars likelihood based off of the
number of spots back I am I'm like five hundred thousandth in line right now most likely it's not
going to go into place until 2023 and as a result it'd be 6 500 which will go in as 65 additional
the next question I had is what type of accounts are there because there are different types of
IRAs I mentioned the simple IRA which is something that is done through my work and then you have the
traditional and Roth which means that you don't need a an employer to set up that program for you
traditional means that it's pre-tax money this is stuff that goes in and you can be written off on
your taxes so say you put six thousand dollars in at the end of the year you're going to be able to
write off six thousand dollars worth of income because it was not supposed to be taxed in this
way you can either have it automatically come out of your account so your paycheck so then
it won't be taxed or at the end of the year you can put it in there and you'll get that refund
this is not something that is super attractive to me because as a young person the most important
thing that we have when it comes to investing is time so over the course of the next 40 Years of
investing this is going to allow our accounts to grow significantly and when you have this
traditional account that means that the gains and actually all of it considering you haven't paid
taxes on the money that you're contributing that is all going to be taxed by the time
we take it out so for someone like myself it's going to be way more attractive to have a Roth
account a Roth account means that it's post-tax money it has already been taxed at whatever tax
bracket you're supposed to be but once it goes into that account it's going to grow tax-free
which is super exciting because over the next 40 years or so of me investing that's going to be a
lot of time for it to compound with compounding interest the thing you need is you need rate of
return the higher the better and time time is almost more important than the rate of return
so you have the ability to make both of these accounts with Robinhood really depends on what
type of tax bracket you're in if you're in a high tax bracket right now and you're maybe a little
bit older it might be more beneficial to look at traditional if you're a young person like myself
Roth is going to be the way to go most of the time highly recommend doing some calculations
to see which one's going to be best for you so a question you may have is is that one percent match
really going to do anything that's going to be 60 this year and 65 dollars next year is that going
to make that much of a difference so let's do a compounding interest calculator exercise to kind
of see what type of difference we'd have with that type of that one percent match it doesn't sound
like a lot I'm going to use the normal numbers that I always use 40 years because I am 25 right
now so 40 years I'll be 65 which is the standard classic retirement age we're going to use 10 which
some people think is a little too aggressive some people think it's a little conservative I'm just
gonna use 10 because it's a nice even number and we're going to see what that looks like without
that one percent match so based off of that you would return 2.87 million dollars by the time
I'd retire that's a lot of money and that's why we're going to be using those Roth contribution
more than the traditional because all of that money that's in there is going to be tax-free
by the time you take it out so the Baseline is 2.87 million dollars assuming that we are putting
6 500 in a year at 10 over 40 years and so when you take this into account additional 65 dollars
per year what does that really going to do to you so we have the 2.87 which is if you didn't have
that extra 65 dollars if you add that 65 it only becomes 2.905 so you get a little bit of increase
but it's not that significant so well at first I thought this was going to have a much bigger
effect on your long-term returns it's actually not that great but there's you have to look at it as
free money this is money that you wouldn't have otherwise and so this is something to actually
consider it's not going to be the make or break point for how much wealth you're going to be able
to build in the future but anytime you can get free money especially with a match I think it's
worth considering so let's talk about the people that I think would do best with this anyone with
a retirement account could benefit from this this is the contribution limit of 65 which is a
hard cap and having this one percent additional is more money than you're going to be able to
invest in any other type of account but when you look at Robinhood the people that are going to be
most likely to use it because the average age of the user is 31 years old is going to be a young
person that doesn't have that much experience investing in the stock market so if I was brand
new starting out investing in the stock market I think this is something that I would actually
consider Robin Hood's interface is probably the best thing about it it's easy to use it's easy
to look at and you're able to kind of figure out what's going on with a lot of ease when you look
at something like a TD Ameritrade which is where I have my Roth IRA currently if you don't know what
you're looking at it can be pretty complex so if I was starting over fresh this is something that
I may consider and then eventually switch it over but for someone like myself I just value having
a set in stone broker like TD Ameritrade that's been around for so many years as my my broker so
for someone like myself I don't find this that attractive but based off of the average age of
the person using Robin Hood and how nice it is for people just getting started anytime you can
motivate people to invest more money I think it's beneficial and worth looking into so well it's not
something I'm going to take advantage of I think that there are people that can benefit from it
even though you're not going to have that crazy difference in the types of returns with an extra
65 dollars but I do think it's worth looking into so then the other question that came up to me is
why did Robin Hood do this anytime you come up with a a new way of investing or something where
you're going to have a match you have to wonder what their what's their gain why are they doing
this if you look at the trend of Robin Hood they have that huge boom with a stay-at-home movement
as people got really excited about investing the stock market with stuff like GameStop and
AMC but since then they've kind of had a rough go of it since they ipo'd their stock price is under
10 and it's down 75 percent this year and they're losing clients quickly what are the metrics that
you look at is daily monthly users which in their last earns report was down 1.8 million monthly
average users which is a decrease of 13 year over year so the whole idea of this is they're
given the incentive of that one percent match but they're trying to get people to stay with Rob and
hit for the long term and by putting a retirement account into it is going to incentivize people to
use Robinhood for the long term so they're trying to keep people on the app they're
trying to give an incentive that's where that one percent comes from but one of the things that I
think is interesting is if some other platforms are going to have to adopt this in the future
Robin Hood for as much as people give it crap has done a lot of good for the investing community one
of the first things that they did and one of the reasons why I got started on Robin Hood is that
they got rid of commissions commissions were a set fee that was paid on either end of a transaction
that really took a hit on the smaller accounts sometimes it would be five dollars per transaction
and if you're having a hundred dollar buy that is five dollars coming out when you buy it and then
five dollars coming out when you sell it so that is a huge hit so it's gonna be interesting to see
if some of the other Brokers are going to look at this and go oh we don't want our retirement money
getting taken away and going to something like a Robin Hood maybe we'll have to do it as well
there is a possibility that the other Brokers don't really care they don't think that the
big money is going to be going towards retirement accounts like this so it's possible that nothing
comes from it but I will be interested to see if any Brokers kind of take the bait to see if this
is something that they're going to have to do in the future so let me know what you thought about
this Robin Hood news is it something you're going to consider trying out or do you think that that
one percent is not attractive enough to consider let me know what you thought about this video in
the comments down below and let me know what topics you'd like me to discuss going forward
thanks for watching my name is Andy there's going to be a video popping up on screen right now if
you'd like additional content for me and I will see you in the next video thanks for watching