I loathe Robinhood for a multitude of reasons, but I transferred the entirety of our ~$200k Roth IRA balances to them six months ago because they offered us a 3% bonus (~$6k). The bonus was paid in full, tax-free, directly into the Roth IRA, with the condition that the money remains there for five years to avoid clawback.
They’re running the same 3% IRA promotion again for a limited time, from Oct 16 to Oct 27: Robinhood Hood Week.
The downsides:
- You have to pay Robinhood $5/month for 12 months (per person, so Mrs. FP and I paid $60 each, totaling $120).
- You need to keep the money with Robinhood for five years (which shouldn’t be an issue for buy-and-hold investors).
- You’ll need to convert any mutual fund holdings to ETFs, as Robinhood doesn’t accept mutual funds (this took us about two minutes).
- Relevant MyMoneyBlog tutorial on how to do so at Vanguard (link).
I have several friends with over $1M in rollover IRA balances. If they’re willing to jump through these minor hoops, 3% of $1M is $30k for an asset transfer that could take just a few hours. That’s a tax-free return of $15k per hour (since the bonus goes directly into the Roth).
There is also a brokerage transfer bonus being offered, but to qualify for the 2% bonus (vs the 1%) I’d need to take out a margin loan. It sounds like a headache, but I’ll spend some time in the coming days figuring out whether it’s worth the hassle for a taxable $14k bonus on our $700k brokerage balance.
Relevant links:
In conclusion, Robinhood is a terrible company but I don’t mind taking their money when they offer it. I’ll jump through hoops like a circus animal to get the dangling carrot.
I don’t trust Robinhood with this much money.
I don’t blame you for feeling that way.
Looks like a good deal, thanks for the info. Curious if you reserved a spot for the 3% gold credit card too?
I reserved a spot but haven’t heard a peep from them in the ensuing 6 months.
I am not holding my breath. Plus, the new US bank 4% seems like a better deal anyway. My BoA Platinum Honors gets me 2.625% at a minimum, so the Robinhood card is only marginally better.
5 years is a long time to tie up with Robinhood, and it seems like they are aware of that – hence the pretty generous 3% tax-free offer. Would love to know your findings on the 2% margin brokerage hack. I wasn’t considering it for 1%, but 2 is definitely intriguing.
Also plan to move some assets to USBank for the 4% card, so don’t wanna tie a lot up with RH.
I’m with you. 1% for a brokerage transfer isn’t great, but 2% gets me interested.
The 5Y hold on the IRA transfer seems like a long time on the surface, but I won’t be touching the money for decades anyway, so why not get a 3% bump (and interest on that bump) in the interim? That was my logic for jumping aboard 6 months ago.
If I were 60 and needed that money in the coming years, I wouldn’t have done so. But if I were 60 with $5M in IRA balances, then I guess I’d be throwing away $150k by not doing so. That’s a large sum of money.
I guess there are some competing tensions for brokerage money these days (as always):
* Merrill: $100k for credit card reward bump
* US Bank: $100k for 4% card reward bump
* Wells: $2.5k for $250k transferred
* Robinhood: 2% on assets transferred (with margin gimmick)
* Status quo: keep it simple with 1 brokerage, but forgo bonuses and credit card juicing
To me, it’s all after-tax about dollars per hour. Chasing a few (or all) of the above yields a very high after-tax dollars per hour, orders of magnitude more than through my normal 9-5. But it comes at the cost of more complexity (which I somewhat enjoy managing).
When you fill up your RH Roth IRA now, do you just buy ETFs each year in RH?
I have zero intention to continue my relationship with RH beyond the 5Y period, so my plan is to stick with Vanguard/Fidelity for my future IRA contributions and bring my RH money back to Vanguard/Fidelity the nanosecond my 5 years is up.
Did you have to call Vanguard to convert from MF to ETF before the transfer?
Yes, a call is required at Vanguard. No tax implications, luckily. Just quadruple check that you are converting to ETF and not selling.
My IRA was actually at Fidelity before transferring to RH, so I had to manually sell the MF and buy an ETF the following day at market open. It would be easier at Vanguard.
Has anyone considered leaving the money with RH? Paying the yearly $50 gold and maximizing the IRA contribution, for the yearly 3% match, would pay for itself. And using the brokerage account would net you an instant 1% bonus with every dollar invested.
Do you know if they allow for back door Roth contributions?
In the past I’ve tried looking into it and could never get a straight answer on the topic.
“You’ll need to convert any mutual fund holdings to ETFs, as Robinhood doesn’t accept mutual funds (this took us about two minutes).”
Could you describe the mechanics of this? I have one Vanguard fund at Fidelity that would need to be converted. Also, would the conversion be taxable if not in retirement account?
In taxable at Vanguard, a VTSAX => VTI tax-free conversion (for example) is definitely in play.
At Fidelity, that wouldn’t be an option.
In IRAs, any manual MF => ETF conversion would be in play without tax implications.
Here’s the relevant MyMoneyBlog tutorial: https://www.mymoneyblog.com/how-to-convert-vanguard-mutual-fund-to-etf-online.html#comments
I know Robinhood currently has 3% matches on annual IRA contributions, with a similar 5 year lockup. Are you thinking you’d skip that if it’s still available? It would be a roughly $400 bonus there (minus the $50 Gold subscription), though I haven’t looked into it enough to know how easy RH makes it to do backdoor conversions or how that would work with the bonus (would the bonus land in the traditional IRA and so be taxed through the conversion? is the conversion allowed with the lockup terms?)
My thinking is as follows: $100k*3% – $50 = $2.95k, which was a sufficiently large carrot to deal with dumb RH. Particularly when Mrs FP did so as well. Almost $6k across the two of us. A decently sized carrot.
On an ongoing front, $7k*0.03 – $50 = $160. Granted, it would be double thanks to Mrs FP. For me, that’s not enough incentive to get my future contributions to stay with RH given that I despise the company viscerally.
The real money in this silly (but potentially very profitable) game is moving large piles of assets from broker to broker in perpetuity (X => Y => Z => X => Y => Z…). The size of the carrot generally grows with the size of your assets.
Does Robinhood accept individual treasury bonds?
I don’t know. Perhaps someone else can chime in.
I went back and forth on this the first time around, and wound up deciding to go for it the week after the offer ended, so happy to see that they brought it back. Thanks for letting us know! We currently have our IRAs in FZROX and knew we’d need to get out of that to transfer at all, but it does make it a bit trickier to get into an ETF. Did you wind up going with VTI for the ETF requirement? I see your portfolio just reports VTSAX, and VTI is basically equivalent except for the 1 basis point in expense ratio that I could see just tracking it all together.
I was in your same boat (FZROX at Fidelity). I sold FZROX, then bought VTI at market open the next day. Unfortunately the market moved against me overnight by a bit which ate into my 3% “alpha”. Oh well.
When I transferred VTI to RH, the fractional shares did not transfer so I still have a small fractional share of VTI in my Fidelity Roth.
Do you already have margin enabled in your brokerage. I enabled it in my Vanguard account yesterday, but still can not buy securities on margin today, although my account is already shown as a margin account.
I applied for margin a few days ago at Vanguard. It shows up in my account but I haven’t tried using it yet. I’m not sure that I’ll follow through with the 2% taxable deal. Still thinking about it.
If you end up doing it, let me know how it goes.
If I don’t do it, I’m throwing away ~$10k after-tax. Not chump change, but there are other bonuses to chase.
The fact that you can’t easily sell tax lots at RH is absurd, for example. And unlike a Roth IRA (which I won’t touch for decades), I don’t mind having access to brokerage for tax loss harvesting, liquidity, etc.
Thanks for sharing your thoughts! I had similar concerns. I plan to limit the total transfer amount to about 500K (heard that’s the insured limit if RH goes bankrupt) and only move those positions that already have substantial appreciations so that it is unlikely that I’ll need/want to sell those before I retire 🙂
Limiting this to $500k + the lowest cost basis shares makes a ton of sense.
How are you going to control which tax lots are transferred? I’ve never figured out how to control that with these asset transfers. In your situation, for example, the only way I assume it can be done is to pre-transfer out your high cost basis shares to another account (even at your current broker) then do a complete account transfer of the remaining $500k. Is that what you are planning on doing?
For the 2% margin bonus, it’s required to maintain the 10K margin balance for 2 years, after transfer. Is that right? So we will be paying margin interest for 2 years?
Don’t quote me on this, but from what I gather you only need to transfer the $10k margin balance. After it’s transferred, you should be able to repay the loan and stop incurring interest.
Unfortunately, I do not know how to control that either. I just wanted to move those with the lowest average cost basis. Previously, I have been leaving these positions at Vanguard for reasons that I forgot 🙂
Also, saw from this website https://personal1.vanguard.com/pdf/margin.pdf that Vanguard would not allow margin on ETFs for the first 30 days. I just recently converted MF to ETF, so I probably can’t do it anyway.
The no margin within 30 days policy is also in place for mutual funds.
I don’t think you should run into issues if you convert to ETFs because those mutual funds were purchased a long time ago.
But I could be wrong there
According to the following, RH does allow backdoor.
https://robinhood.com/us/en/support/articles/roth-conversions/
I’m debating whether do to it. I’d net about 1% after taxes but I’d end up with 3% more growing tax free. The other alternative is to perform the backdoor somewhere else and then transfer it to RH if they offer the 3% deal again. This would net the full 3%.
Given my distrust of RH, I would prefer not to do a backdoor Roth with them.
But if you trusted them for future backdoor Roth contributions, it’s a bummer that the “match” would hit the Trad, and thus be taxable when converted.
Frugal professor, you convinced me to take advantage of the IRA transfer match. Going to take advantage of it this time. Thanks for the heads up!
Good luck. Hopefully you make the transfer deadline. Also, don’t forget to pay the $5 per month for the required year.
I am very eager to hear what you decided to do, as I’m considering the 3% IRA offer and worry the offer is too good to be true. As I understand it, Robinhood doesn’t support rollover IRA accounts. Are there significant downside implications of giving up the rollover status and forgoing the chance to roll back into a 401k plan at some point? Thank you!
I did the IRA bonus 6 months ago and have no regrets.
I decided not to pursue the brokerage bonus.
Your comment was the first time I’d heard that they wouldn’t support rollover IRAs. The only downside I can think of to giving up rollover status is forgoing the backdoor Roth option in the future. But, for most of us, that is a non-issue.
Thank you! Went ahead and pulled the trigger on the IRA transfer. What about the 1% on taxable? Seems appealing for a Vanguard eft buy and hold investor. If Robinhood fails, underlying assets are safe, right? I bought a Tesla Model Y based on your post about the car and I am truly thankful you are sharing your experiences on this blog!
Happy to help.
The 1% taxable bonus from RH is pretty mediocre for various reasons (long hold requirement, inability to touch money). Check out these resources for more competitive offers:
* https://www.doctorofcredit.com/best-brokerage-bonuses-earn-up-to-3500/
* https://www.bogleheads.org/forum/viewtopic.php?t=196884&start=9150 (navigate to last pages for recent promos)
The Wells Fargo $2.5k for $250k with a 90-day hold is pretty competitive. Nice to double dip across spouses.
I really enjoy your blog, FP! I seriously considered RH’s Roth IRA 3% bonus (twice now) but decided to go with Merrill+Citi+Chase(+others?) instead, which I calculated to come out higher than RH for a 180k balance over 5 years. More effort of course and a solid chance of failure, but I think I’ll sleep better.
Your name is fantastic. If you are a woman, FruGalGal or Fru(Gal)^2 would be acceptable variations.
The Merrill + Citi + Chase (+ others?) tri/quad/quint-fecta sounds like a great plan. Those are much more reputable companies than RH and you are probably less likely to regret your decision.
I’ve come to the same conclusion for my brokerage account. Wells Fargo is probably my next bonus (x2 if Mrs FP will do it with me). I need to get off my butt and start chasing some bonus money. I’ve been lazy lately. It has been 4 months since my last brokerage money ($750 at Merrill)…
You are right. No issues creating margin balance on Vanguard. Finally got the 2% bonus on a half million transfer from vanguard to RH. Initially did a partial transfer, but RH messed up the margin transfer (transferred $10000 cash instead of -10000 margin balance…). Then did a full transfer, RH honored the full 2% bonus after talking to customer service.
Congrats!
I haven’t tried it yet, but read you can. I’m planning to do it this weekend.