The 401(k) plan isn't the only employer-sponsored retirement plan around. Instead, the SIMPLE IRA may be a tax-advantaged option for the self-employed and small business owners who want to help their employees save for retirement.
SIMPLE IRA contribution limits 2026
The annual SIMPLE IRA contribution limits for 2026 are:
- Under age 50: $17,000.
- Age 50 and older: Extra $4,000 catch-up contribution, for a total of $21,000. Those ages 60, 61, 62 or 63 can contribute $5,250 as a catch-up contribution, for a total of $22,250.
However, some participants in applicable plans can contribute more in 2026. As part of a provision in the Secure 2.0 Act, participants in a plan offered by an employer who has no more than 25 employees can contribute $18,100. There's a catch-up contribution of $3,850 for those 50 and older or $5,250 for those age 60 to 63.
For employers with 26 to 100 employees, these same higher limits may be available if the employer provides either a 3% matching contribution or a 4% employer contribution. Ask your employer or plan administrator if this higher limit applies to you.
SIMPLE IRA limits compared to 401(k) limits
These contribution limits are lower than those for a 401(k). The 401(k) contribution limit is $24,500 in 2026. People aged 50 and older can contribute an extra $8,000 as a catch-up contribution. Due to the Secure 2.0 Act, those aged 60, 61, 62 and 63 get a higher catch-up contribution of $11,250.
But people with a SIMPLE IRA may take part in another employer-sponsored plan (say, if a person had more than one job) as well.
What's more, while employers are not required to match employee contributions to a 401(k), generally they must kick in on a SIMPLE IRA, either matching contributions of up to 3% of employee compensation or fixed contributions of 2% to every eligible employee. (The "SIMPLE" stands for "Savings Incentive Match Plan for Employees.")
Aside from the different contribution limits — and the fact that SIMPLE IRAs are available only at companies with fewer than 100 employees — the two work similarly. Just as a 401(k) does, a SIMPLE IRA allows investors to defer taxes on contributions and investment growth until the cash is used in retirement.
Other important notes for a SIMPLE IRA:
- Rollover period: Participants in a SIMPLE IRA can roll their cash into a traditional IRA two years after first contributions to the account.
- Contribution due dates: Employee salary reduction contributions need to be made within 30 days of the last day of the month in which the funds would have been otherwise paid to the employee. Employer matching or nonelective contributions need to be made by the federal income tax return deadline, including extensions.
- Big penalty for early withdrawal: As with many tax-advantaged accounts, you face a 10% penalty on top of regular income taxes for withdrawing before age 59 ½. But for SIMPLE IRA withdrawals within the first two years, that tax penalty is increased to 25%. Other withdrawal rules are similar to those for traditional IRAs.
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- 1. IRS. https://www.irs.gov/retirement-plans/cola-increases-for-dollar-limitations-on-benefits-and-contributions. Accessed Dec 26, 2025.
- 2. IRS. SIMPLE IRA plan. Accessed Dec 26, 2025.
- 3. IRS. SIMPLE IRA plan FAQs. Accessed Dec 26, 2025.
- 4. IRS. SIMPLE IRA withdrawal and transfer rules. Accessed Dec 26, 2025.
