Self-employed people like me are worse off than the typical W-2 employee in one important way. That is, they don’t have access to an employer-sponsored 401(k) plan. Employers often match retirement benefits to 401(k)s, but who exactly matches my Individual Retirement Account (IRA)? The answer may surprise you.
Newer investing apps like Robinhood, Acorns, and SoFi® Invest are rushing to match your employer’s IRA deposits (up to 3%). You receive a percentage of your deposits, just like if you were employed by a large company.
Not all IRA matches are equal and have a string appended to them (not always). Discover how the following investment apps can help you save money for retirement faster, and their downsides.
1. Robinhood matches up to 3% on IRA deposits
The brokerage app Robinhood matches up to 3% on IRA deposits if you hold your funds in Robinhood for at least five years (and hold Robinhood Gold for one year).
All Robinhood members earn at least a 1% match on their IRA deposits. If you deposit $100, Robinhood will add $1. Deposit $10,000 and get $100. I understand. It’s an easy and hassle-free way to save for retirement. You can build savings faster than with a typical non-matching IRA.
Robinhood Gold members earn three times that amount. This is often enough to cover the cost of a $5 per month Robinhood Gold membership, and then some. Find out if opening an IRA is right for you with Robinhood and earn up to 3% more toward retirement.
2. Acorns match up to 3% on IRA deposits
Acorns, a robo-advisor app, matches up to 3% on IRA deposits when you keep your funds in Acorns (maintain your subscription) for at least four years.
Acorns Silver members ($6/month) receive a 1% match on your deposit up to your annual maximum contribution limit. If you max out your 2024 giving, you can earn up to a $70 match, which nearly covers your subscription costs. This offer has no expiry date, which is unusual.
Acorns Gold members earn 3x more benefits. Quick math: Gold membership costs $12 per month ($144 per year). If you max out your 2024 IRA contributions, Acorns will match your IRA deposit amount by $210 and more than cover your dues. It’s not bad at all if it swings.
3. SoFi® Invest matches 1% of your IRA deposit
SoFi®, the banking, investing, and lending app, will match 1% on your IRA deposits through the end of 2024 when you keep your funds in SoFi® Invest for two years after the promotion ends.
SoFi® Invest is offering this promotion until the end of 2024. New and old members can receive a deposit equal to 1% up to their annual contribution limit. You will receive your bonus within 2 months after your deposit is cleared. (Rollovers do not count towards match promotions.)
Disadvantages of IRA matching
To earn the full IRA match, you’ll need to keep depositing funds for a number of years. If you withdraw early, the stockbroker may withdraw all or part of the match.
Brokers do this to prevent users from hopping from one place to another. You’ll be locking up your money with the broker for years in exchange for additional savings for retirement. Don’t throw a match into the app, get a bonus, and expect to immediately roll over your account and get another bonus.
If you trust your broker enough to stick with them long-term, it may be worth keeping your funds locked up. In the worst case scenario, you will roll over your account anyway and lose your bonus.
IRA deposit match contribution limits
The IRA deposit match doesn’t count against your annual contribution limit ($7,000 in 2024 if you’re under 50, $8,000 otherwise). So you can save without worrying about reaching your contribution limit sooner than expected.
However, IRA contribution limits are much stricter than 401(k) limits. In that regard, W-2 employees with 401(k) matches continue to have an advantage over self-employed savers.
According to research from Fidelity, the typical person’s match rate for a 401(k) is 4.8%. Self-employed people like me still have a long way to go before they are on par with W-2 employees. But it’s a start. I’ll stay with my favorite broker for years if it helps me save for retirement.
