What Is the Maximum Contribution to a SIMPLE IRA Over 50?

A Savings Incentive Match Plan for Employees (SIMPLE) IRA serves as a retirement savings vehicle designed for small businesses and their employees. This plan offers a streamlined approach for employers to provide retirement benefits, often with less administrative complexity than other retirement options. The structure encourages both employee savings and employer contributions, fostering a collaborative approach to retirement planning. This article will detail the various contribution limits associated with SIMPLE IRAs, providing clarity on how much employees and employers can contribute.

Employee Contribution Maximums

Employees participating in a SIMPLE IRA can make elective deferrals from their salary into their accounts. For the year 2025, the standard maximum amount an employee can contribute is $16,500. This limit is set by the Internal Revenue Service (IRS) and is subject to annual adjustments based on inflation and other economic factors. These contributions are typically made on a pre-tax basis, which can reduce an employee’s taxable income for the year they are made.

The SECURE Act 2.0 introduced additional flexibility regarding employee contribution limits for some plans. For employers with 25 or fewer employees, the basic elective deferral limit can increase to $17,600 in 2025. Employers with 26 to 100 employees may also offer this higher limit, provided they make a 4% matching contribution or a 3% non-elective contribution.

Catch-Up Contributions for Older Savers

Individuals aged 50 and over are eligible to make additional “catch-up” contributions to their SIMPLE IRA accounts. For 2025, the standard catch-up contribution for those aged 50 and above is $3,500. This amount is added to the regular employee deferral limit, allowing eligible savers to contribute a total of $20,000 in most cases. This provision helps individuals closer to retirement age accelerate their savings.

A further enhanced catch-up contribution is available for specific age groups starting in 2025 due to the SECURE Act 2.0. Participants who are aged 60, 61, 62, or 63 in 2025 can contribute an additional $5,250 as a catch-up amount. This enhanced limit allows these individuals to contribute a total of $21,750 in the year.

Employer Contribution Rules

Employers sponsoring a SIMPLE IRA plan are required to make contributions on behalf of their eligible employees. There are two primary mandatory contribution methods employers can choose from. One option is a dollar-for-dollar matching contribution, generally up to 3% of each employee’s compensation. This matching contribution applies only if the employee chooses to make their own elective deferrals.

Alternatively, employers can opt to make a non-elective contribution of 2% of each eligible employee’s compensation. This 2% contribution must be made for all eligible employees, regardless of whether the employee makes their own salary deferrals. For this non-elective contribution, the compensation considered for calculation is capped at $350,000 for 2025. Employer contributions to a SIMPLE IRA are immediately vested, meaning employees have full ownership of these funds from the moment they are contributed.

Overall Contribution Limits

Understanding the overall maximum contribution to a SIMPLE IRA involves combining employee and employer contributions. There is no single “overall plan limit” that combines these amounts in the same way as some other retirement plans. Instead, the total amount an individual can have contributed to their SIMPLE IRA is the sum of their elective deferrals, including any applicable catch-up contributions, plus the mandatory employer contributions.