A Simple IRA (Savings Incentive Match Plan for Employees Individual Retirement Account) is a type of retirement savings plan designed for small businesses (with 100 or fewer employees) and their employees.
Easy to set up and manage (compared to 401(k)s). Funded by both employee salary deferrals and employer contributions. Employees can contribute through payroll deductions. Employers must contribute, either:
A match of up to 3% of the employee’s salary, or
A non-elective contribution of 2% of each eligible employee’s salary (even if the employee doesn’t contribute).
2025 Contribution Limits:
Employees can contribute up to $16,000/year (plus an extra $3,500 if age 50+).
Employers add their contributions on top of that.
Restrictions:
No loans allowed (unlike some 401(k) plans).
Early withdrawals (before age 59½) typically come with a 10% penalty — or 25% if taken within the first 2 years of participation.
A Simple IRA is best for Small Business Owners who want a low-cost, tax-deferred way to help themselves and employees save for retirement.
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