SIMPLE IRA Calculator 2025 — calculate SIMPLE IRA contributions, limits, and employer match

A SIMPLE IRA (Savings Incentive Match Plan for Employees) is a retirement savings plan designed specifically for small businesses with 100 or fewer employees. Think of it as the middle ground between a traditional IRA and a 401(k) plan—offering higher contribution limits than a regular IRA while maintaining the simplicity and lower administrative costs that small business owners need.

In 2025, SIMPLE IRAs allow employees to contribute up to $16,500 annually through salary deferrals, with an additional $3,500 catch-up contribution for those age 50 and older. What makes SIMPLE IRAs particularly attractive is the mandatory employer contribution—either a dollar-for-dollar match up to 3% of compensation or a 2% nonelective contribution for all eligible employees, regardless of whether they contribute themselves.

Understanding SIMPLE IRA Contribution Rules: Employee and Employer Responsibilities

One of the most important aspects of SIMPLE IRAs is the dual contribution structure—both employees and employers must contribute. This mandatory employer contribution distinguishes SIMPLE IRAs from other retirement plans and provides a guaranteed boost to employee savings.

How the 3% Match Formula Works

With the 3% matching contribution, employers match employee contributions on a dollar-for-dollar basis. For example, if you earn $50,000 annually and contribute 10% ($5,000), your employer would match up to 3% of your salary ($1,500). However, if you only contributed 2% ($1,000), your employer would only match $1,000—leaving $500 of potential employer contribution on the table.

Understanding the 2% Nonelective Option

The 2% nonelective contribution works differently. The employer contributes 2% of each eligible employee's compensation regardless of whether the employee contributes anything themselves. For a $50,000 salary, this means a guaranteed $1,000 employer contribution, even if the employee chooses not to participate. This option provides employees with some employer contribution regardless of their participation level.

Real-World SIMPLE IRA Examples: Three Common Scenarios

Understanding how SIMPLE IRA contributions work in practice helps you make informed decisions about your retirement savings. Let's explore three realistic scenarios to see how the numbers play out.

Even with straightforward retirement plans like SIMPLE IRAs, participants and employers can make costly mistakes. Being aware of these common pitfalls can help you maximize your benefits and avoid penalties.

SIMPLE IRAs offer significant tax advantages that make them powerful tools for retirement savings. Understanding these benefits helps you appreciate why these plans are so valuable for both employees and employers.

Our SIMPLE IRA calculator helps you understand your contribution limits, employer matching, and total annual savings. Follow these steps to get the most accurate and useful results for your financial planning.

SIMPLE IRAs offer small business employees a powerful tool for retirement savings with mandatory employer contributions that provide a significant advantage over traditional IRAs. By understanding the contribution limits, employer matching rules, and tax benefits, you can maximize this valuable retirement benefit.

The key to success with a SIMPLE IRA is consistency and maximizing employer contributions. Always contribute enough to receive the full employer match—this is essentially free money that immediately doubles your return. For those under 50, aim to contribute the maximum $16,500 if possible. If you're 50 or older, take advantage of the additional $3,500 catch-up contribution to accelerate your retirement savings.