Digging into the Particulars on IRA Transfers and 401k Rollovers — My Cash Weblog


Robinhood presents an improved 3% match on IRA contributions if you happen to subscribe to their Gold membership, which prices both $5 or $6.99 monthly. Via 4/30/24, you can even get a 3% match on IRA transfers and 401k/403b/457/401a rollovers. Please begin with my preliminary 3% IRA Match overview, the Robinhood FAQ, and Robinhood Phrases & Situations [pdf]. After doing hours of further analysis, this can be a follow-up put up with loads of particulars for other people that additionally wish to cowl all of the bases.

I’m at present in the course of my very own switch, and right here’s the walkthrough to this point:

  • Open a Robinhood brokerage account (finished years in the past) and put some cash inside.
  • Signed up for Robinhood Gold (first 30-days free, then $5 or $6.99/month). It can be crucial you do that first, earlier than the switch.
  • Opened a Roth IRA account on 4/10 (go away empty). I declined Securities Lending, because it removes SIPC safety.
  • Requested a switch from Vanguard Roth IRA on 4/11 (all Vanguard ETFs inside).
  • Obtained e mail “Roth IRA account switch request has been accepted’ on 4/15.
  • At the moment ready on switch (estimated 5-7 enterprise days) as of 4/16.
  • As soon as it arrives, Robinhood ought to credit score the three% instantly upfront. To maintain it, I must hold the transferred stability + bonus quantity within the IRA for five years. I additionally must hold paying for Robinhood Gold for a full 12 months previous the bonus paid date. I plan to activate computerized dividend reinvestment and never contact it for five years.
  • I don’t plan on making future IRA contributions into Robinhood, as that can reset the 5-year minimal maintain time.

Listed here are some screenshots from the method:

Robinhood doesn’t enable all asset varieties, so you possibly can’t personal mutual funds, particular person bonds, and closed-end funds. Robinhood will not be a full-featured brokerage agency. Right here is the full checklist of what’s and isn’t allowed. They assist the next:

  • U.S. exchange-listed shares and ETFs
  • Choices contracts for U.S. Alternate-Listed Shares and ETFs
  • ADRs for over 650 globally-listed corporations

Which means that if you wish to transfer your stability over to Robinhood, you’ll have to promote any mutual funds (or convert them to ETFs), particular person bonds, brokered CDs, and so forth. I transformed my Vanguard mutual funds to ETFs, and it took 1-2 enterprise days.

SIPC insurance coverage limits and extra insurance coverage. Robinhood is a member of the Securities Investor Safety Company (SIPC), which steps if a dealer fails. Robinhood has additionally bought further extra SIPC insurance coverage on the non-public market. From the Robinhood website:

Robinhood Monetary LLC and Robinhood Securities, LLC are each members of SIPC, which protects securities for patrons of its members as much as $500,000 (together with $250,000 for claims for money). Explanatory brochure accessible upon request or at www.sipc.org.

We’ve bought a further insurance coverage coverage for Robinhood Markets, Inc., Robinhood Monetary LLC, and Robinhood Securities, LLC to complement SIPC safety. The extra insurance coverage turns into accessible to prospects within the occasion that SIPC limits are exhausted. This extra insurance coverage coverage offers safety for securities and money as much as an combination of $1 billion, and is proscribed to a mixed return to any buyer of $50 million in securities, together with $1.9 million in money. Just like SIPC safety, this extra insurance coverage doesn’t shield towards a loss out there worth of securities.

From SIPC.org::

SIPC protects towards the lack of money and securities – equivalent to shares and bonds – held by a buyer at a financially-troubled SIPC-member brokerage agency. The restrict of SIPC safety is $500,000, which features a $250,000 restrict for money.

Is SIPC a U.S. Authorities Company?
No. SIPC will not be an company or institution of the US Authorities. SIPC is a non-profit membership company created below the Securities Investor Safety Act.

My brokerage agency has extra SIPC insurance coverage. How does that work?
Extra SIPC insurance coverage is insurance coverage supplied by a personal insurer and never by SIPC. The insurance coverage is meant to guard brokerage prospects towards the chance that prospects won’t get better all of their money and securities within the continuing below the Securities Investor Safety Act (SIPA). Beneath many of those insurance policies, buyer eligibility for restoration will not be decided till after the SIPA liquidation of the client’s brokerage agency has concluded and the quantity of the client’s restoration in that continuing has been established.

Some individuals have issues that Robinhood is a smaller firm with a historical past of questionable judgment and violating securities rules. Robinhood holds the present file for highest FINRA effective ever. Because of this, you could select to restrict the quantity transferred to Robinhood to below $500,000 in property (and $250,000 money) per eligible account sort. Listed here are the totally different “capacities”. For instance, you possibly can have a person taxable account, a conventional IRA, and a Roth IRA at Robinhood and each would have $500,000 in protection. I will likely be staying below these limits as nicely, however my IRA stability merely isn’t that huge anyway.

Observe that if you happen to opt-in (or don’t opt-out) to Inventory Lending through the account switch or account opening course of, any securities which are loaned out are not protected by the SIPC. That is normally offset by a promise of 100% collateral, however that assumes belief that Robinhood will put up that collateral. See Gamestop brief squeeze for a really current instance of Robinhood… not posting sufficient collateral. Subsequently, I additionally don’t suggest Inventory Lending with Robinhood.

Robinhood limitations on beneficiaries. Robinhood solely permits a main beneficiary who’s an grownup. Which means no trusts, no minors, and no “per stirpes” directions. See article.

Whom can I designate as my beneficiary?
To be eligible as a TOD or IRA beneficiary, the person should be an individual who’s at the very least 18 years previous, a US Citizen, or in any other case be legally permitted to open a Robinhood account.

The Robinhood Gold IRA Deposit Match counts as curiosity earned inside your IRA. From the official Phrases and Situations:

Robinhood processes and treats the Robinhood Gold IRA Deposit Match as curiosity earned by the IRA account for tax reporting functions. The curiosity quantity relies on a share of contributions made into the IRA Account. The curiosity earned by the IRA account won’t be topic to, or affect, the utmost annual greenback contribution restrict or the utmost annual deductible quantity. Please word that the Robinhood Gold IRA Deposit Match could also be taxable revenue for conversions of a non-deductible IRA contribution to a Roth IRA. Robinhood doesn’t present tax recommendation. You might be inspired to seek the advice of together with your tax skilled about applicable tax reporting and remedy regarding this bonus award and the deposit of the bonus award in your account. Any taxes ensuing from the bonus award are your duty.

From the FAQ:

Does the IRA match depend towards my annual IRA contribution restrict?
No. The IRA match counts as curiosity revenue in your IRA and doesn’t depend towards your annual IRA contribution restrict.

How is the IRA match handled for tax reporting functions?
The IRA match is handled as curiosity revenue in your IRA. We received’t ship a 1099-INT as a result of tax standing of IRAs.

This necessary issue makes the efficient worth increased the same old money bonus that’s taxable revenue. The bonus will get to continue to grow inside your Roth IRA, tax-free.

Robinhood will even reimburse your switch charges as much as $75 if you happen to switch at the very least $7,500 price of property. After the switch is accomplished, you have to contact then by way of the dwell chat operate and they’re going to reimburse you after you add a screenshot of the payment charged.

Whenever you switch out finally, Robinhood does cost a $100 Outgoing ACAT payment. Ideally, there will likely be one other dealer to reimburse that payment sooner or later, however who is aware of. Right here is their full payment schedule [pdf].

Customer support suggestions. Robinhood doesn’t have a conventional cellphone quantity to achieve customer support. It’s important to go the assistance part, seek for a subject, after which search for the “Contact Us” button on the backside of the web page (presumably after you’ve learn the canned reply and nonetheless need assistance). Then you possibly can both have a Stay Chat or request a Callback the place they may name you again on the cellphone at a later time.

Safety and Privateness suggestions. To entry these settings on the iPhone app, click on on the pinnacle/physique icon on the underside proper, then the three traces icon on the highest left, after which “Safety and privateness”. On the plus facet, Robinhood helps a wide range of 2FA choices: SMS, Gadget passkeys, and Authenticator apps. Scroll down additional and you can even choose out of their knowledge sharing.

I’ll replace this with new developments, however I wished to publish now as a result of the deadline is April thirtieth, and I don’t know if meaning it’s a must to provoke the switch by then, or the property should arrive efficiently, or what. As of proper now, there’s nonetheless an honest buffer because it takes a couple of week for many IRA transfers. For these with giant IRAs, this could be a huge bonus. You might have reservations about transferring your property to Robinhood, which is actually comprehensible. I hope this helps you make a extra knowledgeable determination in your personal scenario.

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