Robinhood, a free-trading app for millennials, will offer retirement accounts to its users for the first time. That could help rekindle growth. But HOOD stock fell Tuesday.
Via a blog post Tuesday, Robinhood introduced individual retirement accounts, or IRAs. Customers can sign up for a waitlist starting Tuesday and get early access in coming weeks. The IRA program will be broadly rolled out in January 2023.
Once contributions are made, users can instantly access up to $1,000 in funds to invest in stocks and ETFs, Robinhood said.
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In addition, Robinhood announced Tuesday that it will offer a 1% match on the dollars contributed to retirement accounts. Traditional and Roth IRAs, which are increasingly popular investment vehicles, offer tax benefits while allowing people to save for their future.
Robinhood App Launches Retirement Accounts
The 401(k)-style contribution match could help Robinhood stand out in a competitive field. Its established online broker rivals include Fidelity, Charles Schwab, Interactive Brokers and Morgan Stanley's E-Trade, all of which already offer IRAs but not a match.
With millennials firmly in their 30s or even their 40s, the not-so-young cohort is a huge target for retirement accounts.
Robinhood is also targeting those lacking access to workplace retirement plans, such as gig workers and entrepreneurs.
"We believe that saving for retirement should be easy and accessible to all, and not dependent on where or how you work," its blog post Tuesday said.
HOOD Stock, Online Brokers
Shares of Robinhood fell 2.9% to 9.39 on the stock market today. HOOD stock has lost more than 57% of its value over the past year and remains below key moving averages.
Charles Schwab eased 0.8% Tuesday. SCHW stock, which is on the IBD 50 list of top growth stocks, undercut an 81.18 cup-with-handle buy point.
IBKR stock, also an IBD 50 stock, gained 1.4% Tuesday, finding support at the 21-day line. Interactive Brokers shares are working on an 81.56 cup-with-handle buy point. E-Trade owner Morgan Stanley shed 2.6%, breaking below the 21-day but above the 50-day and 200-day lines.
Growth stocks led a broad market sell-off Tuesday as recession fears swell afresh.
Zero-Fee Trades Pioneer
Robinhood rose to popularity a slick mobile app and zero-fee trades, attracting hordes of millennials. On Tuesday, it cited a study that lack of access to a workplace plan is the most significant retirement savings barrier for nontraditional workers.
At the start of the Covid-19 pandemic, Robinhood app benefited from a retail trading boom. Under lockdowns, individual investors flocked online to trade stocks and ETFs.
But its fortunes waned after a series of setbacks and amid growing recession fears this year.
The company has announced two rounds of layoffs in 2022, while posting revenue declines three quarters in a row.
Management had signaled the launch of Robinhood retirement accounts on a third-quarter earnings call.
