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SIMPLE IRA Contribution Limits for 2019

The employee contribution limit for a SIMPLE IRA is $13,000, or $16,000 for those 50 and over.
Jan. 24, 2019
Investing, IRA, Retirement Planning
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The 401(k) isn’t the only employer-sponsored retirement account around. SIMPLE IRAs may be an option for employees of smaller companies and the self-employed who want tax-advantaged savings for their futures.

SIMPLE IRA contribution limits

The annual SIMPLE IRA contribution limits are:

  • Under age 50: $13,000
  • Age 50 and older: $16,000

These contribution limits are lower than those for a 401(k), which in 2019 allows employees to contribute up to $19,000 of income, or $25,000 for those 50 and older. But people with a SIMPLE IRA may take part in another employer-sponsored plan (say, if a person had more than one job) and make contributions up to a total of $19,000.

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.

2019 contribution limits

 Under 5050 and older
SIMPLE IRA$13,000$16,000
Traditional or Roth IRA$6,000$7,000

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
  • 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 59½. 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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