SIMPLE IRA Calculator 2026
$17,000 base ($18,100 enhanced), 3% match or 2% non-elective
Last updated: November 2025 · Sources: IRS Notice 2025-67, IRC §408(p), SECURE 2.0 §117
Plan Information
50+ unlocks $4,000 catch-up; ages 60-63 get $5,250 super catch-up.
Will be capped at $17,000 (your applicable max).
Contribution Breakdown
Federal Tax Savings (Employee Side)
SIMPLE IRA contributions are pretax for federal/state income tax but ARE subject to FICA (Social Security + Medicare). Employer contributions are not subject to any payroll tax.
Understanding the 2026 SIMPLE IRA
2026 Contribution Limits
The base 2026 SIMPLE IRA employee deferral limit is $17,000 (IRS Notice 2025-67). Workers 50+ can add a $4,000 catch-up for $21,000 total. Workers ages 60-63 use the SECURE 2.0 §109 super catch-up of $5,250 instead, totaling $22,250. Under SECURE 2.0 §117, small employers (no more than 25 employees in the prior year) can ELECT to use enhanced limits of $18,100 base; employers with 26-100 employees can also elect the enhanced limit but must contribute either a 4% match or 3% non-elective (vs the standard 3% or 2%).
Mandatory Employer Contribution
Unlike a 401(k), employer contributions are mandatory for SIMPLE IRAs. The employer must choose one of two formulas annually: (1) 3% match dollar-for-dollar on employee contributions up to 3% of compensation, or (2) 2% non-elective contribution for ALL eligible employees regardless of whether they defer themselves. The 3% match is cheaper if not all employees contribute; the 2% non-elective is more predictable and rewards employees who don't participate. The employer must notify employees of the chosen formula before each plan year.
Why Small Businesses Choose SIMPLE
SIMPLE IRAs hit a sweet spot for businesses with 5-100 employees: (1) Low cost, no annual Form 5500 filing, most providers waive setup fees and charge $0-$25/year per participant. (2) Simple compliance, no top-heavy testing, no ADP/ACP nondiscrimination testing, immediate 100% vesting of employer contributions. (3) Predictable employer cost, capped at 3% of payroll. The trade-offs vs a 401(k): much lower contribution limits ($17k vs $24,500), no Roth in older plan documents (but SECURE 2.0 §601 now allows it), no loans from a SIMPLE IRA, and a steep 25% early-withdrawal penalty within 2 years.
The 2-Year Withdrawal Rule
IRC §72(t)(6) imposes a punitive 25% early withdrawal penalty (instead of the standard 10%) on distributions taken within 2 years of your FIRST contribution to any SIMPLE IRA. The 2-year clock starts on your first contribution to that plan, not when you opened the account. After the 2-year period, the standard 10% penalty applies (if under 59½), and you can roll the SIMPLE IRA to a Traditional IRA or 401(k) without penalty. The 25% rule is the harshest in the retirement-plan landscape, never raid a SIMPLE within the first 2 years if you have any alternative.
SECURE 2.0 Enhanced Limits (§117)
SECURE 2.0 §117 (effective 2024) gives employers an option to elect higher limits. For 2026: $18,100 base instead of $17,000, with a proportional 10% increase to catch-ups. Employer types: ≤25 employees, can choose either standard or enhanced freely. 26-100 employees, can elect enhanced but must increase employer match to 4% (instead of 3%) or non-elective to 3% (instead of 2%). The election is at the EMPLOYER level (not employee), and you must amend your plan document to opt in.
Switching to a 401(k)
Historically you had to wait until the next plan year (Jan 1) to terminate a SIMPLE IRA, because SIMPLEs have a calendar-year-only operation rule. SECURE 2.0 §332 (effective 2024) finally allows mid-year termination of a SIMPLE IRA and replacement with a Safe Harbor 401(k) or 403(b), provided the new plan covers all SIMPLE participants for the rest of the year. The transition is administratively complex (coordinating with both custodians, allocating contributions across plan-year boundaries), so many businesses still wait until year-end for simplicity.
Roth SIMPLE IRA Option
SECURE 2.0 §601 (effective 2023) added a Roth contribution option for SIMPLE IRAs. Roth SIMPLE contributions are not deductible but grow tax-free and qualified withdrawals after 59½ are tax-free. Most major custodians (Fidelity, Schwab, Vanguard) rolled out Roth SIMPLE buckets in 2024-2025. As with Roth 401(k)s, the high-earner Roth catch-up rule under SECURE 2.0 §603 applies starting 2026 if your prior-year W-2 wages exceeded $145,000.
Frequently Asked Questions
SIMPLE IRA vs Solo 401(k)?
SIMPLE caps at $17,000 ($18,100 enhanced) plus a 3% match. Solo 401(k) caps at $72,000 combined. The Solo wins on max contribution but is only for owner-only businesses; SIMPLEs work for up to 100 employees with simpler admin.
Why do small businesses choose SIMPLE IRAs?
Low cost (no Form 5500), simple compliance (no ADP/ACP testing, no top-heavy), and predictable employer cost capped at 3% of payroll. Sweet spot is 5-100 employees.
What is the 2-year withdrawal rule?
IRC §72(t)(6): a 25% early withdrawal penalty (vs the standard 10%) on distributions within 2 years of your first contribution. After 2 years, standard 10% rules apply and you can roll the SIMPLE to a Traditional IRA.
What are SECURE 2.0 enhanced SIMPLE limits?
SECURE 2.0 §117: small employers (≤25 employees) can elect $18,100 base instead of $17,000. Employers with 26-100 employees can also elect but must use a 4% match or 3% non-elective contribution.
Can I switch to a 401(k) mid-year?
Yes since SECURE 2.0 §332 (effective 2024). You can terminate a SIMPLE mid-year and replace it with a Safe Harbor 401(k) or 403(b), provided the new plan covers all SIMPLE participants for the rest of the year.
Are SIMPLE contributions tax-deductible?
Employee contributions are pretax for federal income tax (reduce W-2 Box 1) but ARE subject to FICA. Employer contributions are fully deductible and not subject to FICA. Roth SIMPLE contributions (SECURE 2.0 §601) are after-tax.