Simple IRA Calculator

Small business retirement savings

Details
Simple IRA Projection
Annual Contributions
Employee: $0.00
Employer: $0.00
Total: $0.00
Projected Balance: $0.00
Years: 30
Total Contributed: $0.00
Growth: $0.00
2024 Limits: $16,000 ($19,500 if 50+)
Simple IRAs: easier admin than 401k

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What is a Simple IRA?

A Simple IRA (Savings Incentive Match Plan for Employees) is a retirement plan designed for small businesses with up to 100 employees. It offers a streamlined alternative to 401k plans with less paperwork, lower costs, and simpler administration. Employees can contribute through salary deferrals, and employers must either match contributions or make non-elective contributions.

Simple IRAs are ideal for small businesses that want to offer retirement benefits without the complexity and expense of a traditional 401k plan. The employer match requirement helps encourage employee participation while providing a valuable benefit that helps attract and retain talent in competitive labor markets.

How to Use This Calculator

Step 1: Enter your annual salary or expected annual compensation.
Step 2: Input your current age and planned retirement age.
Step 3: Enter current Simple IRA balance (or 0 if starting new).
Step 4: Set your employee contribution percentage (up to 100% of salary, max $16,000 for 2024).
Step 5: Enter employer match percentage (typically 3% match or 2% non-elective).
Step 6: Set expected annual return rate (7% is typical for long-term growth).
Step 7: Click "Calculate" to see your total contributions and projected balance.

Simple IRA Strategies & Pro Tips

  • Maximize Match: Contribute at least enough to get the full employer match—it's essentially free money
  • Employee Deferrals: You can defer up to $16,000 in 2024 ($19,500 if age 50+), which reduces current taxable income
  • Employer Options: Employers choose between 3% matching contribution or 2% non-elective contribution for all employees
  • Immediate Vesting: All contributions are 100% immediately vested—no waiting period to claim your money
  • Less Paperwork: Simple IRAs have minimal administrative burden compared to 401k plans
  • Early Withdrawal Penalty: 25% penalty if withdrawn within first 2 years (vs 10% after), so plan accordingly

Frequently Asked Questions

What is the difference between Simple IRA and 401k?
Simple IRA: For businesses with 100 or fewer employees, less paperwork, lower setup costs, mandatory employer contributions, immediate 100% vesting, no loans allowed. 401k: Available to any size business, more complex administration, Roth option available, loans permitted, potential vesting schedules. Simple IRA is ideal for small businesses wanting simplicity; 401k offers more flexibility for larger or growing companies.
Who can establish a Simple IRA?
Any business with 100 or fewer employees who earned at least $5,000 in the previous year can establish a Simple IRA. This includes sole proprietors, partnerships, and corporations. Must not maintain another employer-sponsored retirement plan (except for collective bargaining agreements). Available to both for-profit and tax-exempt organizations.
What are the Simple IRA contribution limits?
2024 limits: Employee salary deferrals up to $16,000 ($19,500 if age 50+). Employer must either: Match employee contributions dollar-for-dollar up to 3% of compensation, OR contribute 2% of compensation for all eligible employees regardless of whether they contribute. No overall limit on employer contributions. All contributions belong to employee immediately (100% vested).
Are employer contributions mandatory?
Yes. Employers must make contributions every year the plan is maintained. Two options: 1) Matching contributions: dollar-for-dollar match up to 3% of compensation (can be reduced to as low as 1% in 2 of 5 years), OR 2) Non-elective contributions: 2% of compensation for all eligible employees, even if they don't contribute. Cannot switch between options mid-year.
When is the Simple IRA deadline?
Establishment deadline: October 1 of the year for which contributions will be made (or earlier if business started after October 1). Employee contribution deadline: December 31. Employer contribution deadline: Tax filing deadline including extensions. Employers must notify employees of their rights to participate before the 60-day election period (typically November 1 to December 31).
Can I withdraw from Simple IRA early?
Early withdrawals (before age 59½) face a 25% penalty if taken within the first 2 years of participation—higher than the typical 10% penalty. After 2 years, the standard 10% early withdrawal penalty applies. Exceptions include: disability, death, unreimbursed medical expenses exceeding 7.5% of AGI, health insurance premiums while unemployed, higher education expenses, first-time home purchase (up to $10,000). RMDs start at age 73.
Can I roll over a Simple IRA?
During the first 2 years of participation: Can only transfer to another Simple IRA. After 2 years: Can roll over to another Simple IRA, Traditional IRA, or employer-sponsored plan (401k, 403b, 457). Two-year rule is strict—rolling to a non-Simple plan within first 2 years triggers taxation and penalties. Keep track of your participation start date.
Should my small business choose Simple IRA or 401k?
Choose Simple IRA if: 100 or fewer employees, want minimal paperwork, lower costs (no Form 5500 filing), all employees can participate, immediate vesting preferred, no loans needed. Choose 401k if: More than 100 employees, want Roth option, need loan provisions, desire profit-sharing flexibility, want vesting schedules to retain employees, can handle more complex administration and costs. Many small businesses start with Simple IRA and upgrade to 401k as they grow.
What happens if my business grows beyond 100 employees?
If you exceed 100 employees, you generally have a 2-year grace period to continue the Simple IRA. After that, you must switch to a different retirement plan (like 401k). The grace period applies only if you had 100 or fewer employees in a previous year. Plan ahead if rapid growth is expected.
Can I have both Simple IRA and another IRA?
Yes, you can contribute to both a Simple IRA and Traditional or Roth IRA. However, your Traditional IRA deduction may be limited if you're covered by a workplace plan (Simple IRA counts). 2024 phase-out: $77,000-$87,000 (single) or $123,000-$143,000 (married filing jointly). Roth IRA has separate income limits ($146,000-$161,000 single; $230,000-$240,000 married).
How do I set up a Simple IRA?
Steps: 1) Choose a financial institution (bank, brokerage, insurance company) to serve as trustee, 2) Complete IRS Form 5304-SIMPLE (if employees choose their own trustees) or 5305-SIMPLE (if employer selects one trustee for all), 3) Provide employees with information about the plan and their rights, 4) Set up individual IRA accounts for each participant, 5) Process contributions. No IRS filing or approval needed.
What investment options are available?
Simple IRA investments are the same as Traditional IRAs: stocks, bonds, mutual funds, ETFs, CDs, money market funds. The range depends on the trustee institution chosen. Brokerage firms offer thousands of options; banks may be more limited. Employees direct their own investments and bear the investment risk. Target-date funds are popular for hands-off investing. Unlike 401ks, there's no employer-selected menu restriction.