What is a SIMPLE IRA and can self-employed individuals use it?

A SIMPLE IRA (Savings Incentive Match Plan for Employees) is a retirement plan primarily designed for small businesses with employees, but it can also be used by self-employed sole proprietors with no employees. **2025 SIMPLE IRA Contribution Limits:** - Employee elective deferral: up to $16,500 (plus $3,500 catch-up if age 50+) - Employer matching: either 2% of compensation (fixed) or dollar-for-dollar match up to 3% of compensation - Total (if you're self-employed with no employees): $16,500 + $16,500 × 3% match = ~$17,000 **Comparison with SEP-IRA and Solo 401k:** - SIMPLE IRA is typically inferior to both a Solo 401k and SEP-IRA for self-employed individuals with no employees - SEP-IRA allows up to $70,000; Solo 401k allows up to $70,000 with higher contributions at moderate income - SIMPLE IRA's main advantage: must be established by October 1 (vs. December 31 for Solo 401k), but offers lower contribution limits **When to use a SIMPLE IRA:** Best suited for businesses with 1–100 employees who want a straightforward plan. For self-employed with no employees, a SEP-IRA or Solo 401k is almost always better. **Key rules:** - Must be established by October 1 of the year contributions are made - 2-year non-rollover restriction: funds cannot be rolled to another IRA type for 2 years - Mandatory employer contribution (matching or 2% non-elective)

• SIMPLE IRA 2025: $16,500 employee deferral + employer match (max ~$17,000 for sole proprietors)
• Must be established by October 1 of the tax year
• For self-employed with no employees, SEP-IRA or Solo 401k are almost always better
• 2-year restriction: cannot roll to another IRA type for 2 years
• SIMPLE IRA is best for businesses with employees wanting a straightforward plan