There’s a battle brewing in the investment space. Brokers are battling for your retirement dollars, and they are offering you free money when you transfer your IRA to them.
Take the IRA transfer bonus from investing app Webull, for example. The front page of Webull explains how their IRA transfer offer works right now, with a current expiration date of May 31, 2024:
“Join Webull’s amazing offer only for a limited time by May 31, 2024! Transfer from traditional IRAs, Roth IRAs, Rollover IRAs, or 401(k)s. We’ll add 3.5% for all transfers and 3.5% for the new contributions.”
Then there’s the IRA transfer bonus available from the Robinhood investing app, which matches 1% on IRA transfers for anyone who initiates one. The offer also grants a 1% match on new funds added to a Robinhood IRA by regular investors, or a 3% match for members of the Robinhood Gold premium subscription service.
These bonuses seem like a sweet deal at face value, especially for investors who have large retirement account balances. If you have $300,000 in an IRA and transfer it to Webull right now, for example, you’ll get an IRA transfer bonus worth $10,500 just for putting in the legwork and making sure the transfer goes through.
But, the devil is often in the details when it comes to IRA transfer bonuses, and there are some fine print terms you should know about before you move your retirement money. If you’re wondering what the catch is with IRA bonus offers available through apps like Robinhood and Webull, here’s an overview of everything you need to know.
Watch Out For The Fine Print
IRA bonus offers that award matching retirement contributions aren’t always as simple as they sound. For example, the company offering the bonus won’t automatically deposit the money you’re due to your new account the minute you make the transfer. There are often myriad fine print details that limit how much of your bonus is given out and when, and it may take up to five years (or longer) to receive the full bonus you signed up to receive.
The Webull IRA transfer bonus is a prime example of this. This bonus only applies to transfers of up to $1 million dollars, which is actually rather generous. However, bonus funds are added to customer accounts each year in May over a five-year timeline. So, you get one-fifth of the bonus amount in May 2025, and the other installments are paid during the month of May in 2026, 2027, 2028, and 2029.
If you decide to take some of the money out of your account before May of 2029, there’s even more rules to be aware of. That’s because withdrawals of money from the retirement account reduce the amount of the bonus offered, even if the money was kept in the account for years beforehand. Webull offers this example in its fine print:
“Eligible Customer makes a Qualifying Deposit of $12,000 to their IRA Account. Subsequently, before the Final Bonus Payment Date, the Eligible Customer transfers $6,000 from their IRA Account to a retirement account with a different institution, so that their IRA Account contains $6,000 of Eligible Assets as of the Final Bonus Payment Date. Eligible Customer will only be entitled to receive a Deposit Bonus equal to 3.5% of $6,000.”
Robinhood also has its share of fine print within its IRA match offer, which you can read over in its IRA Match FAQ. For example, you have to keep the money in your Robinhood IRA for at least five years to keep the match you earned. If you’re a Robinhood Gold member, you have to maintain your subscription for at least one year from the date of your first 3% match to keep the extra 2% match you earned on new contributions to your account. You still have to keep the account open for five years as well.
The good news about the Robinhood IRA match is the fact you get it pretty quickly after you transfer your IRA to the app. This makes it unique from the Webull offer, which offers a higher match amount but pays out the bonus funds over five annual installments.
Other Considerations
Mathematician and adjunct professor Michael Edesess says there is always a catch with IRA transfer bonus offers. And the same could be said for similar bonus offers that promise bonus money for moving accounts, bonus stock or other freebies.
“Webull and Robinhood are not loss-making organizations, and due to the zero-sum nature of this particular business relationship, their profits must inevitably be their client’s losses,” he says.
Edesess says that investing apps in particular encourage customers to engage in trading versus the traditional “buy and hold” strategies most investors use with their retirement accounts. And that trading may be directed to brokers who are able to take advantage of the trader, or it may result in trading fees or hidden charges. Fortunately, both Robinhood and Webull are known for their commission free trades, although other fees and charges can apply.
For example, Robinhood’s fine print says that, even though they don’t charge commissions on trades, the Financial Industry Regulatory Authority (FINRA) charges a regulatory transaction fee and trading activity fee for sell orders.
“Investors should know that there is no free lunch in the investment field,” says Edesess.
Wealth manager Cliff Ambrose of Apex Wealth also says that investors need to consider a range of different factors before they move accounts based on promotional offers. This means researching the platform’s security measures, fee structure, and the range of available investment options.
“Understanding the user interface and customer support offered by the platform is also vital, as these can significantly impact the investing experience, especially in volatile or uncertain market conditions,” he says.
Beyond that, investors need to make sure any platform they consider is properly regulated and offers adequate protections for their assets, such as SIPC insurance in the United States. Both Robinhood and Webull are members of SIPC, which protects securities of its members in amounts up to $500,000 (with a sub-limit of $250,000 for cash).
The Bottom Line
At the end of the day, IRA transfer bonuses can definitely be worth pursuing. You just have to be willing to jump through some hoops to get your bonus money, including keeping your account open and your money invested in one place for a minimum of five years.
You also have to be willing to spend the time and energy required to transfer your IRA (or other qualifying account) in the first place, and not everyone wants to go through the hassle.
Read the full article here
