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Similar to most other types of retirement accounts, nothing has changed in regards to the contribution limits for the SIMPLE IRA for 2016, thanks to stagnant inflation over the past year. Here's what you need to know about the 2016 SIMPLE IRA limits and why they remain the same this year.

Employer and employee contribution limits
Like many other employer-sponsored retirement accounts such as 401(k)s, SIMPLE IRA contributions can be made by both employers and employees.

Employees are allowed to choose to contribute up to $12,500 to their SIMPLE IRA for the 2016 tax year, with the condition that this amount doesn't exceed their total compensation. For example, if a part-time employee earns $5,000 during the year, that is the maximum they can contribute.If an employee is 50 or older, they are also allowed an additional $3,000 as a "catch-up" contribution, provided that it doesn't cause the total contribution to exceed their total compensation for the year.

Employers have two choices. They can choose to contribute 2% of every employee's compensation, regardless of how much each employee contributed -- if anything. Or, they can choose to match employees' contributions dollar for dollar, up to 3% of compensation.

The 2% contribution choice is based on the first $265,000 of each employee's compensation, so the upper limit is $5,300 for highly paid employees. On the other hand, the 3% option is also limited by the amount each employee chose to contribute. For instance, if an employee making $100,000 chose to contribute $6,000, then the employer would have to match 3% of $100,000 or $3,000. But if that same employee contributed only $2,000, then the employer match would be just $2,000.

Why did it stay the same?
In a nutshell, the cost of living is roughly the same right now as it was a year ago. The ability to contribute to retirement accounts adjusts over time to reflect the increased cost of living (inflation).

However, since there was no increase in the Consumer Price Index (CPI) between the third quarter of 2014 and the third quarter of 2015, there were few changes to any retirement limitations. In fact, the only major changes in retirement-related limits for 2016 were slight upward adjustments in certain income requirements, such as the eligibility threshold to contribute to a Roth IRA. Nothing related to SIMPLE IRA accounts was affected.

US Consumer Price Index Chart

How to calculate your own limits if you're self-employed
Since the SIMPLE IRA is a popular choice for the retirement savings of self-employed individuals, let's take a look at how this group can determine their contribution limits. Self-employed individuals are considered both the employer and employee for contribution purposes, so their maximum contribution is a combination of both sides. To illustrate this, let's look at a few examples.

First, consider the case of a 40-year-old individual who reports $75,000 in business income on their Schedule C for the 2016 tax year. In this case, they would be eligible for an employee salary deferral contribution of up to $12,500, as well as an additional 3% of this income as an employer "matching" contribution, which works out to $2,250. In total, the maximum contribution this individual could make would be $14,750.

Next, consider a highly successful 55 year-old business owner who expects to earn $800,000 in 2016. This individual would be allowed to contribute $15,500 as an employee contribution – or the standard $12,500 limit plus the $3,000 catch-up contribution. On the employer side, since 3% of the business income would exceed the allowable amount, the employer portion of the contribution would be capped at $15,500 since it would be limited to the amount of the employee contribution. In total, the maximum this person could contribute in 2016 would be $31,000.

Is a SIMPLE IRA right for you?
A SIMPLE IRA is a good way for small business owners and self-employed individuals to provide tax-advantaged retirement savings for themselves and their employees. Start-up and maintenance expenses are minimal, there are plentiful investment choices, and the rules are easy to understand.

In general, the contribution limitations to a SIMPLE IRA are fairly straightforward and, well, simple, especially when compared to other self-employed retirement options such as the SEP-IRA and Solo 401(k) -- hence the name. However, these other account types allow for higher maximum contributions, so if you'd prefer to save a bit more aggressively for your retirement, you may be better off with one of the alternatives. To learn more about your IRA options and which might be best for you, check out The Motley Fool's IRA Center.