SIMPLE IRA Contribution Limits 2026: What Employees of Small Businesses Should Know

November 5, 2026 Invest Clarity Path Team

If you work for a small business, you may hear about a SIMPLE IRA at work. The name can sound hard, but the idea is simple. It is a way to put money aside for later life, with help from your employer. This guide explains what a SIMPLE IRA is, how money goes in, and what the limits are in 2026, using plain words and the figures the IRS publishes.

The short answer

A SIMPLE IRA is a retirement plan for a business. In 2026, an employee can put in up to $17,000 from pay, plus a catch up amount if age 50 or older. The employer must also add money, either by matching pay or by adding a flat share for each worker. The money stays in an account for each worker.

What is a SIMPLE IRA?

A SIMPLE IRA is a retirement plan for small businesses in the United States. SIMPLE stands for Savings Incentive Match Plan for Employees. It is made for employers with 100 or fewer employees. Each worker has a separate account in their own name, and the money in that account belongs to the worker.

The plan is meant to be simple to set up and simple to run. A small business does not need a large team to run it. The employer sets the plan up with a bank or another money firm, workers choose how much pay to put in, and the employer adds its share. The money is then put into investments the worker picks from the choices in the plan.

How money goes into a SIMPLE IRA

Money goes in from two sides. First, the employee puts in part of their own pay. This is called a salary reduction contribution, because the pay is reduced by the amount that goes into the plan. The worker picks the amount, up to the yearly limit, and it comes out of pay before it reaches their bank account.

Second, the employer must add money. The employer cannot choose to add nothing. In most plans, the employer has two main choices. It can match what the employee puts in, dollar for dollar, up to 3 percent of pay. Or it can put in a flat 2 percent of pay for each worker who can take part, even if that worker puts in nothing.

The match only applies up to the level the employer sets, and it cannot be more than the worker put in. In some years, the employer may set the match lower than 3 percent, but the IRS says it must be at least 1 percent, and it cannot be set that low in more than two years out of five. The 2 percent choice is simpler in one way, because every worker who can take part gets the same share of pay.

The 2026 contribution limits

The IRS sets the limits, and it updates them over time as prices change. The table below uses the figures from the IRS page on SIMPLE IRA contribution limits. These are the employee limits, before any employer money is added. The employer money does not count toward the employee limit.

Year	Most an employee can put in	Catch up at age 50 or older
2025	$16,500	$3,500, for a total of $20,000
2026	$17,000	$4,000, for a total of $21,000

For 2026, the main employee limit is $17,000. That is the most an employee can put in from pay in that year, unless a catch up amount also applies. If a worker has more than one employer plan in the same year, the IRS also sets a combined cap for salary reduction contributions across plans, so the worker should check the IRS page before adding the limits together.

What changed from 2025

In 2025, the main employee limit was $16,500. In 2026, it rose to $17,000, a rise of $500. The catch up amount also rose. This is a normal pattern. The IRS reviews the limits each year and may raise them by a small amount when the cost of living rises. A worker should always use the limit for the year the money is put in, not the limit from last year.

Catch up contributions for older workers

Workers who are age 50 or older can put in extra money on top of the main limit. This extra amount is called a catch up contribution. For 2026, the catch up amount is $4,000, so a worker age 50 or older can put in up to $21,000 in total from pay. For workers age 60 to 63, the IRS sets a higher catch up amount of $5,250 for 2026, so their total from pay can be up to $22,250.

How a SIMPLE IRA differs from a SEP IRA

A SIMPLE IRA and a SEP IRA are both plans for small businesses, but they work in a different way. The main difference is who can put money in. In a SIMPLE IRA, the employee can put in part of their own pay, and the employer must add money too. In a SEP IRA, only the employer contributes. The employee does not put in part of their pay.

That difference matters for workers. With a SIMPLE IRA, a worker can choose to save from each pay check, even if the amount is small. With a SEP IRA, the worker depends on the employer to make the contribution. Both plans can help a small business save for retirement, but a worker who wants to control their own saving from pay will find a SIMPLE IRA more direct.

The two year rule for early rollovers

A SIMPLE IRA has a two year rule for moving money out to another retirement account. The two years start from the first date money went into the worker’s SIMPLE IRA. During those first two years, a rollover can normally only go to another SIMPLE IRA. This is a key point to check before moving money.

After the two years have passed, more rollover choices open up. The worker may then be able to move the money to other types of retirement accounts, following the rules for those accounts. The exact choices depend on the plan and the receiving account, so a worker should ask the plan provider and check the IRS pages listed below before making a move.

Worked example: pay of $60,000

Example only. This is a made up example to show how the percentages work. It is not a real person, and it is not advice for any one worker. The numbers are round on purpose, so the maths is easy to follow.

Take a worker who earns $60,000 in pay in 2026. The worker chooses to put in 10 percent of pay. Ten percent of $60,000 is $6,000, so $6,000 goes into the SIMPLE IRA from pay. That is below the 2026 employee limit of $17,000, so the limit is not reached. If the employer matches dollar for dollar up to 3 percent of pay, the employer adds 3 percent of $60,000, which is $1,800. The total that goes in is $6,000 plus $1,800, which is $7,800.

If the same employer used the flat 2 percent choice instead, the employer would add 2 percent of $60,000, which is $1,200, even if the worker put in nothing. With the worker still putting in $6,000, the total would be $6,000 plus $1,200, which is $7,200. If the worker was age 50 or older, the worker could also use the $4,000 catch up amount, but in this example the worker does not need it to reach $6,000.

Things to check before you contribute

Check the year. Use the limit for the year the money is put in.
Check whether your employer uses the match or the flat 2 percent choice.
Check whether you are old enough to use a catch up amount.
Check the two year rule before you move money to another account.
Check the IRS pages below each year, because the limits can change.

Quick answers

How much can an employee put into a SIMPLE IRA in 2026?

In 2026, an employee can put in up to $17,000 from pay. Workers age 50 or older can add a $4,000 catch up amount, for a total of $21,000. Workers age 60 to 63 can add $5,250, for a total of $22,250.

Does the employer have to contribute to a SIMPLE IRA?

Yes. The employer must add money. It can match the employee contribution dollar for dollar up to 3 percent of pay, or it can put in a flat 2 percent of pay for each worker who can take part.

How is a SIMPLE IRA different from a SEP IRA?

In a SIMPLE IRA, the employee can put in part of their own pay, and the employer must add money too. In a SEP IRA, only the employer contributes, and the employee does not put in part of their pay.

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