SEP-IRA contribution limits
Simplified Employee Pension (SEP) IRAs are created by employers, and self-employed people also have the option to create them. Only employers contribute to SEP-IRAs, with all contributions being made with pretax funds.
The SEP-IRA contribution limit is the lesser of:
- 25% of employee compensation
- $70,000 in 2025 and $72,000 in 2026
For self-employed workers, the 25% limit is based on net income. To calculate the maximum contribution, you must subtract any SEP-IRA contribution you plan to make, as well as the employer portion of payroll taxes, from gross income. Usually, you'll end up being able to contribute around 20% of gross income after doing this calculation.
You're not allowed to make catch-up contributions to a SEP-IRA, regardless of your age. However, contributions do not affect your ability to make regular contributions or catch-up contributions to a Roth IRA. You can also make deductible contributions to a traditional IRA as long as your income isn't too high for you to qualify.
SIMPLE IRA contribution limits
SIMPLE (Savings Incentive Match Plan for Employees) IRAs are also commonly used by small businesses and can receive contributions from employees and employers. Contributions are made with pre-tax funds, like traditional IRAs. Here's a rundown of SIMPLE IRA contribution limits:
- Employees are allowed to make contributions out of their salaries of up to $17,000 in 2026, up from $16,500 in 2025.
- Employees older than 50 are eligible to make catch-up contributions of up to $4,000 in 2026, up from $3,500 in 2025.
- Participants in plans offered by employers with no more than 25 employees can contribute up to $18,100 to SIMPLE IRAs in 2026 (up from $17,600 in 2025) with a catch-up contribution of $3,850 for participants 50 and older.
- These higher limits may also be available to SIMPLE plan participants if the company has 100 or fewer employees and provides either a 4% matching contribution or a 3% nonmatching employer contribution, instead of the 3% matching contribution or 2% nonmatching contribution outlined below.
- Adults aged 60 to 63 can make a higher catch-up contribution of up to $5,250 in 2025 and 2026.
Employee contributions are considered "elective deferrals," which count toward the combined annual limit that employees can contribute to all plans accepting elective deferrals, including 401(k) plans. This means that if you contribute to a SIMPLE IRA, you will reduce the amount you can contribute to a 401(k).
Matching contribution requirements for Simple IRAs
Employers are required to make matching contributions to SIMPLE IRAs using one of two approaches:
- They can make nonelective contributions of 2% of compensation up to a compensation limit of $360,000 in 2026 ($350,000 in 2025). This means employers must contribute to all workers' SIMPLE accounts, regardless of whether the workers contribute any funds of their own.
- They can match employees' salary-reduction contribution dollar for dollar up to 3% of compensation, which is not subject to the $360,000 compensation limit ($350,000 in 2025).
Employers are allowed to reduce the 3% matching contributions, but they may not reduce them below 1% -- and employers cannot reduce the contribution below 3% for more than two calendar years out of the five-year period ending in the calendar year the reduction is effective. Employers must also give employees a reasonable time to decide how much to contribute.
Do IRA rollovers count as contributions?
IRA rollovers occur when a worker rolls over money from a tax-advantaged retirement account into an IRA. For example, if you leave your job, you could roll over your 401(k) into your traditional IRA.
Rollovers do not count toward annual contribution limits or affect your ability to make contributions to your retirement accounts.
Related retirement topics
