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Robinhood Markets Inc. is offering retirement accounts to its users for the first time, hoping the tax-advantaged products can help reverse the brokerage’s decline in trading activity.
The company said it would match 1% of what users put into their traditional or Roth IRAs until they hit their annual contribution limit. For 2022, the Internal Revenue Service set that limit at $6,000 for the younger investors that make up much of Robinhood’s user base, meaning the brokerage’s match would top out at $60 this year.
Users could start adding their names to a wait list for Robinhood’s IRAs on Tuesday, with general availability coming in January.
Millions of novice traders flocked to Robinhood during pandemic lockdowns and the meme-stock craze last year, but high inflation and swooning markets have sapped users’ enthusiasm for investing. The average daily number of retail trades of stocks and options on Robinhood in October declined 36% from the same month last year to 1.9 million. For crypto trading, October average daily volume on Robinhood fell 55% to 200,000.
Robinhood isn’t profitable. Over the first nine months of the year, it lost $862 million on revenue of $978 million. The company held $6.2 billion in cash and cash equivalents on its books at the end of September, giving it runway to invest in areas of expansion.
The brisk growth Robinhood experienced last year meant that a lot of resources went toward basic infrastructure and customer service, Chief Executive Vlad Tenev said in an interview. This year, he added, “was more about some of the basic product gaps in the investing offering.”
Robinhood has said that most of its customers were primarily buy-and-hold investors. Until now, though, it didn’t offer an account option with tax benefits.
Robinhood has missed its own timeline—the middle of this year—for rolling out retirement accounts. Among the products and features that Robinhood launched this year before retirement accounts were the ability to buy and sell Shiba Inu digital coins and the ability to trade options in cash accounts.
Mr. Tenev said the retirement products were more complicated than other services Robinhood launched this year. He also said the big focus for the company was making IRAs available before the 2022 tax-filing season.
Although Robinhood lets users trade crypto in their brokerage accounts, it is only allowing stocks and exchange-traded funds to be bought and sold in retirement accounts at launch.
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