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SIMPLE IRA Contribution Limits for 2026

Byline profile imageWritten by Liz Smith
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Byline profile imageEdited by Patrick Villanova, CEPF®
Byline profile imageEdited by Jeff White, CEPF®
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A SIMPLE IRA is an excellent tool for small business owners to help their employees save for retirement. This type of retirement account combines features of both the traditional IRA and the 401(k). Employees can contribute up to $17,00 to a SIMPLE IRA in 2025, unless they are 50 or older, in which case they can contribute an extra $4,000. For those between ages 60 and 63 the catch-up contribution increases to $5,250.

A financial advisor can help you create a retirement plan that fits your budget and your future.

SIMPLE IRA Basics

SIMPLE IRA is an acronym for Savings Incentive Match Plan for Employees. A SIMPLE IRA is a type of traditional IRA that is designed for small businesses with 100 or fewer employees. To be eligible for a SIMPLE IRA, an employee must have received at least $5,000 in compensation in the previous two calendar years and expect to receive at least that much in the present calendar year.

As an employee with a SIMPLE IRA, you can contribute pre-tax dollars to your plan through “elective deferrals,” either in cash or as a salary reduction contribution. The latter can be a specified dollar amount or a percentage of your salary. While the IRS does not require employees to contribute, it prohibits employees from opting out of receiving non-elective contributions from their employers.

The IRS requires that your employer contributes on your behalf. This can be either a dollar-for-dollar match of up to 3% of your salary or a flat 2% of pay. Employers must contribute regardless of whether the employee elects to contribute on their own.

An employer’s matching contributions are tax-deductible as a business expense. Compared to many other workplace retirement plans, SIMPLE IRAs are cheaper for employers to set up and easy to administer.

What Are the SIMPLE IRA Contribution Limits?

SIMPLE IRAs have higher contribution limits than both traditional and Roth IRAs. As with other plans, the IRS limits contributions to a SIMPLE IRA. These limits are subject to change year to year.

Employee SIMPLE IRA Contribution Limits for 2026

An employee cannot contribute more than $17,000 in 2026 ($16,500 in 2025) to a SIMPLE IRA. However, employees ages 50 or over can contribute an extra $4,000 as a catch-up contribution in 2025 ($4,350 for certain plans). Thanks to a provision of the SECURE 2.0 Act, SIMPLE IRA participants between ages 60 and 63 can make enhanced catch-up contributions of up to $5,250 in 2025 and 2026.

Lastly, if you participate in any other employer plan during the year, the total cumulative amount of elective deferrals you can contribute to all plans is $24,500 in 2026 (up from $23,500 in 2025).

Employer SIMPLE IRA Contribution Limits for 2026

Employer contributions can be a match of the amount the employee contributes, up to 3% of the employee’s salary. An employer may choose to lower the matching limit to below 3% in lieu of other benefits like stock options. However, an employer cannot lower the threshold below 1%, and they cannot keep the lowered limit in place for more than two out of five years. Your employer must give you reasonable notice ahead of the 60-day election period if they intend to change a match amount.

Another option is for the employer to make non-elective contributions of 2% of the employee’s salary. This means that the employer is required to contribute regardless of what the employee does. For 2026, the IRS caps employer contributions based on a maximum salary of $360,000, effectively setting an employer contribution limit of $7,200. For 2025, these figures were $350,000 and $7,000, respectively.

SIMPLE IRA Withdrawals and Early Distribution Rules

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Withdrawals from a SIMPLE IRA are taxed as ordinary income because contributions are made on a pre-tax basis. Distributions taken after age 59½ are not subject to an early withdrawal penalty, but the full amount withdrawn is included in taxable income for the year. This applies to both employee contributions and employer contributions.

Early withdrawals from a SIMPLE IRA are treated more harshly than those from other retirement accounts. If a distribution is taken within the first two years of participation and the account holder is under age 59½, the early withdrawal penalty increases to 25% instead of the standard 10%. After the two-year period ends, the penalty drops to the standard 10% for early withdrawals, unless an IRS exception applies.

The two-year clock begins on the date of the first contribution made to the SIMPLE IRA, not when the employee becomes eligible or enrolls in the plan. Because of this rule, timing matters when changing jobs or considering a rollover. Moving funds too early can trigger penalties even if the account holder is otherwise eligible for a distribution.

After the two-year participation period, SIMPLE IRA assets can be rolled over to a traditional IRA, a 401(k) or another eligible retirement plan without penalty. Before that period ends, rollovers are generally limited to another SIMPLE IRA. These rules affect how flexible the account is when employment or retirement circumstances change.

Why Are There IRA Contribution Limits?

You may be wondering why there are contribution limits in the first place. Because IRAs are tax-advantaged accounts, contribution limits were introduced to prevent the very wealthy from benefiting more than the average American. By setting contribution limits, the IRS aims to keep tax benefits as incentives for the average worker rather than as a tax shelter for the wealthy.

What Are the Contribution Deadlines for a SIMPLE IRA?

For new SIMPLE IRA accounts to be effective for that tax year, you must establish the account by Oct. 1. Employers must deposit employees’ elective contributions of the month in which they were withheld. They must make matching or non-elective contributions by the tax return filing deadline (including extensions) to receive their deduction.

Bottom Line

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A SIMPLE IRA is a retirement savings account option worth considering if you’re the owner or employee of a small business. The IRS requires employers to contribute on their employees’ behalf, and employees may elect to make contributions. You may want to talk to a financial advisor to understand how contributions can best help your long-term goals.

Retirement Planning Tips

  • A financial advisor can be a valuable resource as you plan for retirement. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • When you’re starting to plan for retirement, you should consider the tax laws of the state you live in. Some have retirement tax laws that are very friendly for retirees, but others don’t. Knowing what the laws apply to your state, or to a state you hope to move to, is key to getting ahead on retirement planning.

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