Jason Moser, a senior analyst at The Motley Fool, joined Cheddar News to discuss the platform's new 1 percent match on new IRA contributions. 

Jason Moser, a senior analyst at The Motley Fool, joined Cheddar News to discuss the platform's new 1 percent match on new IRA contributions. "I'm not certain that 1 percent is enough to really push meaningful action, but it remains to be seen," he said. "You certainly can't fault the company for trying something like this."

Will the Robinhood New IRA Program Be Enough for Future Retirees?

joining us now to discuss is Jason, Jason Moser, senior analyst over at the motley fool, Jason, Good morning. Thanks so much for joining us. So what's your reaction to Robin Hood's decision to do this for their customers? I mean, I think you have to love the message, right? I mean, this really is a positive message. Um encouraging folks to say particularly demographic that Robin Hood attracts right. Most of those account holders and XQ younger. And so encouraging those account holders and prospective account holders to think longer term right to start looking at their ultimate goals for financial independence and thinking in the context of of many years as opposed to quarters. Absolute. Very positive message. I'm not, I'm not certain that 1% is enough to really push meaningful action, but but it remains to be seen, you certainly can't fault the company for trying something like this. Yeah, very good point. And so breakdown sort of how this match is actually gonna work here on this. Yeah, it's important to note, I mean, this is this their differences right? In retirement accounts and this is focused on iras whereas a lot of folks who maybe work with with companies, they might have access to something like a four oh one K. So, so make sure you understand the difference there because ultimately there are limits in what you can contribute to an IRA versus something like a four oh one K if that's through your employer. But the math is pretty simple, right? I mean, the firm, right. Robin Hood will match 1% of any new contributions to a traditional or a Roth ira up to the contribution limit, which I think under 50 years old is $6500. But but just in simple terms if, if you're an investor who contributes $5000 to an Ira with Robin Hood, they'll match 1% of that, which is $50. So you get $50 ultimately for funding an account that is, is ultimately to your benefit, right? I mean you're, you're opening and contributing to an ira to try to achieve financial freedom, right to try to get to that retirement goal whenever that may be. Yeah. And on top of all that, those whose companies give them a match or help them with their iras obviously that's great for them, but I feel like this really impacts and benefits those gig workers or anybody who's self employed, who doesn't get that company match. Yeah, I think you hit the nail on the head there. I mean, most folks who work with companies that offer retirement plans are in a better position, right? At 401K gives you greater limits, right? It gives you obviously a better, a better potential matching from your employer. So it can be more meaningful. And ultimately that results in gig workers in folks who are, who are running their own businesses, right? I mean that they lag in retirement contributions essentially by half versus those who work with traditional employers and have access to something like a 401k. So it absolutely plays into favor for those gig workers and those solo workers who are looking for ways to build retirement savings. Again, I don't know how meaningful, I don't know if 1% is enough really to start pushing meaningful action, but I think it's a great first step and hopefully they take some lesson from this and maybe it's something that that does achieve an ultimate goal. Right? I mean, this is, this is about not only keeping the account holders that they have, but bringing new account holders in and for a business like Robin Hood, that's crucial, right? The account holders are ultimately very sticky, right? There's friction there when you change your financial services over, so most people don't want to do that if they don't have to. So I think this is another way really to engage that the user That they have and also maybe a dangle a carrot out there for perspective account holders as well. Well, I think you bring up a really great point and it's almost in many ways this could be sort of a test case example for other financial institutions out there to maybe do a 1% match as well because you're right, that's not a ton. That's going to really move the needle. But at the end of the day, maybe if it becomes popular, could we, uh, could we see other financial institutions maybe copy this. It wouldn't shock me at all. Right. I mean, I kind of liken this to a credit card credit card rewards program. And in some ways, um, in Robin Hood for all of the challenges the business is witness to this point, right? It has blazed the trail, right? It's changed sort of the way that we view brokerages and it's changed the way the brokerages do business. Right. I mean, seeing now with the 0% commissions, I mean, when, when you're able to really manage your money at a lower cost, it's very attractive prospect. And we saw all these other brokerages really follow suit ultimately. So it wouldn't surprise me at all to see other brokerages try something like this out because you could ultimately, you could liken it to a rewards program and everybody likes getting rewards. Yeah. And Jason on top of that. This also sort of helps Robin Hood sort of broaden their appeal. I mean, if you go through some of their numbers, they lost 1.8 million monthly active users for their, in their third quarter earnings report. That is the lowest level since they were listed as a publicly traded company. So do you almost think moves like this help a company like Robin Hood who's sort of really known more for crypto and all these other things turn things around or do they need to do more? Well, again, I think it's a good first step. I think you really keyed in on something important there though. And that is, you know, when, when you look at Robin Hood's demographic, right? It skews younger and, and that's, that's a great thing if you think about it. I mean, you want to build these, these lifelong account holders and so they're really tapping into a very valuable market there. But 2022 as we all know, has just been a brutal, brutal year for investors. And virtually nothing is immune crypto. Obviously we know all of the headlines there, but, but certainly the, The stock market as well, it's just been a very challenging year for investors, particularly, particularly new investors. And the problem there is that you bring new investors in, they have a really bad first experience by virtue of just the market conditions themselves. A lot of people bail right there. There is that loss aversion. You feel the pain of those losses far more than you feel the joy of gains. So, you see, you see a lot of people bailing from investing altogether in 2022. It's understandable. It's one of our biggest challenges at the motley Fool as well, is is encouraging folks to really look at that, that long review and to think in the context of many, many years. Uh, so, so this is something that I think that Robin Hood, they're gonna have to address this challenge. Again, this is another way that perhaps they can keep the account holders that they have. Bringing account holders back is difficult. But but again, they're tapping into a growing demographic there that should give them plenty of opportunity. Jason Mojo, senior analyst at the motley Fool. Always appreciate your insight. Jason. Thank you so very much for joining us.