SIMPLE IRA

finance

Also known as: Savings Incentive Match Plan for Employees IRA

Written byTimothy Lake

Fact-checked byThe Editors of Encyclopaedia Britannica

A person in business attire holds a blue piggy bank labeled IRA, with a notebook, pen, calculator, and cash on the desk in front of them.

Small business employees need to prepare for retirement, too.

Also Known As:: Savings Incentive Match Plan for Employees IRA

A “Savings Incentive Match PLan for Employees” (SIMPLE) IRA is a tax-deferred, employer-sponsored retirement savings plan designed for small businesses (usually with 100 or fewer employees) to provide a retirement plan to their employees. Employees with SIMPLE plans can make contributions, and their employers can contribute as well. The employer can choose to match up to 3% of employees’ contributions dollar for dollar, or make nonelective contributions of up to 2% of the employees’ income without the requirement that employees also contribute.

For employees, it’s important to note that if they make contributions to multiple employer-sponsored retirement accounts, including 401(k) plans, the total contribution across all accounts is limited to $23,000 in 2024. Employee salary contributions are limited to $15,500, or $19,000 for those older than 50.

SIMPLE plan holders must take required minimum distributions (RMDs) starting at age 73. Roth contributions are available for SIMPLE IRAs thanks to the SECURE 2.0 Act.

Learn more about SIMPLE IRAs and other small business retirement plans.

A solid financial plan can help you prepare for start-up costs, taxes, and periods of uneven income.

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This article was most recently revised and updated by Timothy Lake