If you’ve ever been envious of someone getting free money in their retirement account from an employer that “matches” contributions, you might be interested in how to qualify for matching without an employer! Even if you get employer matching, an IRA match is a nice extra benefit to boost your retirement account.

This post will explain how individual retirement account (IRA) matching works and where to find an IRA that offers it. So, stay with me if you like the idea of getting free money to grow your retirement nest egg!

What is an IRA match?

An IRA match is a deposit to your account from your IRA provider in addition to the funds you contribute. The goal of matching, whether from an employer or an investing company, is to incentivize you to save more and build a larger retirement account.

Robinhood was the first company to offer an IRA match, starting in 2023. It was innovative because matching is typically only provided to employees with a workplace retirement plan, like a 401(k) or 403(b). 

That means anyone with earned income, including the self-employed, can get extra matching funds on their Robinhood IRA. Other companies, like Betterment and SoFi, have recently offered IRA matching. So, I’d bet we’ll see the trend catch on with more investing firms.

How does an IRA match work?

Let’s review how a typical IRA match works so you know if it’s a good choice for you. With Robinhood, they match 1% on contributions, transfers, and rollovers with no caps–or 3% if you have their premium Gold account, with no caps.

Let’s say you roll over funds from an old 401(k), and the account is worth $100,000 after the transfer settles. Your Robinhood match would be 1% or $1,000 if you don’t have a Gold account. You typically receive the funds right away.

The only catch with Robinhood is that you must own the account and hold your eligible contributions for at least five years to keep the match. Or, you must keep a Gold membership for at least one year from your first 3% match to keep the extra 2%.

Betterment’s IRA matching is 1% on contributions to a new or existing account through 2024–but not on rollovers or transfers. So, your match is capped by the 2024 contribution limit of $7,000 or $8,000 if you’re over 50. Depending on your age, you can earn up to $70 or $80, which Betterment says will be paid on or around December 31, 2024.

Does an IRA match count toward the contribution limit?

The good news about IRA matching funds is that they don’t count toward the annual contribution limit. For instance, If you’re a Betterment customer over 50 and contribute $8,000 to a Roth IRA for 2024, your total deposits for the year would be $8,080. The extra $80 match gets treated as interest income in your IRA, not as a contribution.

RELATED: Is it better to have a traditional or Roth IRA?

Is an IRA match the same as a 401(k) match?

While an IRA match might sound similar to a 401(k) match, they’re not the same. As I mentioned, an IRA match isn’t tied to an employer but to an investing company or platform. 

Nor does an IRA match count toward your annual contribution limit. Workplace retirement plans have a much higher contribution limit: $23,000 or $30,500 if you’re over 50, for 2024. An employer’s match doesn’t count toward your annual contribution limit. However, you and your employer can’t contribute more than $69,000 combined, or $76,500 if you’re over 50.

A typical employer match could be up to 3% of your salary. For instance, if you make $100,000 and contribute at least $3,000 to a 401(k), your employer would kick in another $3,000 on your behalf.

You can have both a workplace retirement plan match and an IRA match. However, depending on your income, you may not qualify to make Roth IRA contributions. Also, contributions to a traditional IRA may not be tax-deductible when you or a spouse participate in a retirement plan at work.

READ ALSO: 4 ways to fund a Roth no matter your income

Is it worth getting an IRA match?

Getting a 1% IRA match may seem like little. Still, if you maxed out a Robinhood IRA annually, it could grow into an extra five figures, depending on your return, the future contribution limits, and how long you own the account. The beauty of investing is that small amounts compound, helping your account grow significantly over time.

A downside of IRA matching is the possibility of getting it revoked or having a fee if you make withdrawals before a required holding period or have a balance below a certain threshold. I mentioned that Robinhood requires you to keep an IRA with matching for at least five years, otherwise there may be an early removal fee for withdrawing funds before then.

Before choosing an IRA with matching, compare it to other providers without a match. Some may offer nice perks like a welcome bonus or free account management if you deposit up to a threshold.

Before we go, I want to thank Jacey Saige for her recent TikTok post about the show! She makes great money and budgeting content, so check her out if you’re on TikTok.