The SIMPLE IRA, or Savings Incentive Match Plan for Employees, is a retirement savings plan for small businesses and their employees. SIMPLE IRAs are similar to 401(k) plans, but they have simpler rules and lower administrative costs. Contributions to a SIMPLE IRA are made by both the employee and the employer. For 2023, the contribution limits are as follows:
Employee elective deferrals: $15,500 (plus a catch-up contribution limit of $3,500 for employees age 50 and older)
Employer matching contributions: Up to 3% of the employee’s compensation (not including elective deferrals)
For 2024, the contribution limits will increase to:
Employee elective deferrals: $16,500 (plus a catch-up contribution limit of $3,500 for employees age 50 and older)
Employer matching contributions: Up to 4% of the employee’s compensation (not including elective deferrals)
For 2025, the contribution limits will increase once again. The exact limits have not yet been announced, but they are expected to be similar to the 2024 limits.
SIMPLE IRAs offer a number of benefits:
They are easy to set up and administer.
They have low administrative costs.
They offer tax-deferred growth on investments.
They allow employees to save for retirement without having to contribute their own money.
If you are a small business owner, a SIMPLE IRA may be a good option for you and your employees. SIMPLE IRAs are a great way to help your employees save for retirement while also reducing your own administrative costs.
