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Contributor | Simple IRA | 401(k) | Traditional/Roth IRA | SEP IRA |
|---|---|---|---|---|
Individual | $16,500 | $23,500 | $7,000 | N/A |
Catch-Up Contributions | $3,500 - $5,250 | $7,500 - $11,250 | $8,000 | N/A |
Employer | Matching contributions of up to 3% of any salary, or 2% elective contribution on up to $350,000 in income | Total limit (including employee and employer contributions) is $70,000 not including catch-up contributions | N/A | $70,000 |
A SIMPLE IRA is a tax-advantaged investment account commonly used by self-employed individuals and small employers looking for an easy way to save for retirement.
Contributions to a SIMPLE IRA are tax-deductible in the year they are made, and both employers and employees can contribute. The contribution limit is indexed to inflation and increases over time.
For most individuals, the annual contribution limit for a SIMPLE IRA is $16,500 in 2025 (an increase from $16,000 in 2024). However, pursuant to the SECURE 2.0 Act, some employees are eligible for an automatic 10% increase in the elective deferral limit and can contribute up to $17,600.
Employees 50 and older can also make an extra $3,500 catch-up contribution in both 2024 and 2025 if their plan allows it. This goes up to $3,850 for employees eligible for the 10% automatic increase. For employees ages 60 to 63, there's also a new "super catch-up" contribution limit of $5,250.
If your workplace offers a SIMPLE IRA, or you're thinking about using one, here are the key things you should know.
SIMPLE IRAs, or savings incentive match plans for employees, are used most often by self-employed workers and employees of small businesses. They let you set money aside for retirement without forcing an employer to set up a more complicated employer-sponsored retirement plan such as a 401(k).
Many brokerage firms offer SIMPLE IRAs. Opening one is easy as long as you meet the requirements, including having fewer than 100 employees. Reporting and administrative responsibilities associated with a SIMPLE IRA are less onerous than establishing a 401(k) plan.
Rather than having special administrative procedures, most financial institutions take care of SIMPLE IRA accounts very similarly to how they treat personal IRAs or brokerage accounts. You'll have to fill out some extra forms just to comply with requirements, but that's minor. Employers only have to make sure that they get money deposited to SIMPLE IRAs correctly.
There are two types of contributions that can be made to a SIMPLE IRA:
SIMPLE IRAs have lower limits than what you'd find with a 401(k) plan or certain other retirement plan options.
There are two separate SIMPLE IRA contribution limits.
The maximum SIMPLE IRA employee contribution limit is $16,500 in 2025 (an increase from $16,000 in 2024). Employees who are 50 or older are also eligible to make additional catch-up contributions if their SIMPLE IRA plan permits it. The standard catch-up contribution of $3,500 is unchanged from 2024 however, some employees are eligible for catch-up contributions up to $3,850, and employees 60 to 63 are eligible for a larger super catch-up limit of $5,250.
Employees who contribute to any other employer plans with elective salary reductions are also subject to an aggregate limit of $23,500 in 2025 (up from $23,000 in 2024). In other words, if you have both a 401(k) and a SIMPLE IRA, you can only contribute a maximum of $23,500 across both accounts not including catch-up contributions
Employers can either:
Employers who opt for matching contributions are allowed to reduce the match below 3%. However, it must be at least 1%, and they can reduce the match for no more than two out of five years.
There are other tax-advantaged retirement accounts you may be able to contribute to instead of, or in addition to, a SIMPLE IRA. Some of them have higher contribution limits.
The table below shows the maximum you can contribute to each type of retirement account in 2025.
If you are contributing to multiple types of retirement accounts, make sure you understand the rules. For example, you are limited in the amount you can contribute to a traditional IRA if you or your spouse is covered by a workplace retirement plan -- including a SIMPLE IRA -- and your income exceeds a certain threshold.
By exploring all of your retirement plan options, you can choose the plan(s) that allow you to save the most while reaping tax benefits that make building your retirement nest egg cheaper and easier.