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Halls of Shrewd'm / US Policy❤
No. of Recommendations: 3
Robinhood is offering a 3% bonus for transferring an IRA. Transfer a $100,000 IRA and you get $3000. Clawback of part of the bonus for excess withdrawals in the first 5 years. You have to pay $50 for a 1 year Gold level.
Is this worth doing? I've been hearing about Robinhood for a long time but never opened an account there. How are they? It is certainly better than any other new account bonuses that I have seen from other brokers.
Youtube video discussing it:
https://www.youtube.com/watch?v=TPAsO58C0H4
No. of Recommendations: 1
I don't know much about them and really have no interest in it but if you are bored:
https://www.bogleheads.org/forum/viewtopic.php?t=4... Bogleheads has a thread on it that has reached 32 pages. I guess it started last August when there was a similar bonus and has been updated.
Rich
No. of Recommendations: 1
I'm seriously considering this for my Traditional and Roth IRA. That's a tax free $30k if you transfer a combined $1M. The 3% bonus is received as interest into the IRA so no 1099 is issued.
Rich, why no interest in this? Do you have specific concerns about the offer?
One point I'm not clear on is if they would claw back the bonus on conversions from the traditional to Roth IRA. That would limit the value to me over the next 5 years.
Any other concerns?
bclstube
No. of Recommendations: 0
One point I'm not clear on is if they would claw back the bonus on conversions from the traditional to Roth IRA.
Nope, they specifically say that this *will* claw it back. It's somewhere in the FAQs.
Simple solution is to not convert in the 5 year period. Not really a big deal.
No. of Recommendations: 1
I read the FAQ - they specifically call out the clawback for RMDs ("Note, that the early IRA match removal fee may apply to required minimum distributions as well.").
For Roth conversions the FAQ says:
"What happens if I earn an IRA match in my traditional IRA but then want to convert it to my Roth IRA?
The IRA match generally would be taxable during a conversion because it’s counted as interest income for tax reporting purposes. Everyone has a different tax situation and should consult a tax advisor."
After reading all of the clawback FAQs, one interpretation can be that as long as your total retirement account balance does not go below the amount you transferred to get the match, it will not be clawed back. Total being the part that is in question.
As far as not doing Roth conversions for 5 years... I understand the benefit of doing conversions but I'm finding it difficult to quantify the actual dollar amount of the benefit to determine if it is a big deal or not. Using some of the simple Roth Conversion online calculators, the tax benefit of converting seems to be greater than the 3% bonus. And that does not include IRMAA.
I guess I can convert just the bonus plus any gains(being optimistic) in the account.
No. of Recommendations: 4
After reading all of the clawback FAQs,...
It is tucked away in the Robinhood Gold IRA Deposits Match Terms & Conditions (pdf file).
"The funds that earned the match must be kept in the account for at least 5 years to avoid a potential Early IRA Match Removal Fee."
"In the event that a customer deposits to a Traditional IRA and subsequently converts to a Roth IRA, the Robinhood Gold Cancellation IRA Match Removal Fee would apply to the customer’s Traditional IRA."
I can kind of understand that restriction. Tracking funds that are in a conversion can be complicated. Much easier on the bookkeeping to just say "Nope!"
I understand the benefit of doing conversions...
This has been much discussed. I recall long threads on the old TMF boards when Roth conversions first became available.
What a conversion does is shift the tax you pay from sometime in the future to now. The only financial benefit is if your current marginal tax rate is lower than it will be in the future.
Using some of the simple Roth Conversion online calculators, the tax benefit of converting seems to be greater than the 3% bonus. And that does not include IRMAA.
??? There is no direct tax benefit, just a difference of _when_ you pay the tax. What calculator shows a significant tax benefit?
3% bonus is real money. In fact, it is better to get that 3% for a Roth than a regular IRA. You will eventually tax income tax on it in the TIRA, but not in the Roth.
No. of Recommendations: 0
Thanks for digging out the info from the pdf, that sounds pretty definitive.
Yes,the conversion benefit is due to my expectation that I will be in a higher tax bracket once I'm getting social security and taking RMDs (if no further conversions). Doing conversions would give me more control over my taxable income and help manage Irmaa cliffs.
Thanks for your input. It's helpful.
