Free SIMPLE IRA Calculator & Contribution Limits

SIMPLE IRA contributions are one of the most popular retirement savings options for individuals with low-to-moderate incomes. With a SIMPLE IRA, you can make tax deductible contributions to your employer’s qualified plan on a pre-tax basis up to $12,500 per year or $15,000 total over two years. This calculator helps determine how much money you will be able to contribute each year based on your annual income and age at the time of contribution (60).

The “simple ira calculator with match” is a free tool that allows users to calculate their retirement savings and see their contribution limits. This tool is great for people who are new to investing.

Growth Projection for a SIMPLE IRA over 5 Years*

*Assumes equal contributions and a 5% yearly return on investment.

Contact TD Ameritrade if you want to start a SIMPLE IRA with a trusted supplier. It enables investors to trade in most publicly traded stocks and provides companies with competitive incentive schemes to establish sponsored retirement plans.

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How to Interpret the Results of Your SIMPLE IRA Calculator

The following are some general guidelines for understanding the SIMPLE IRA contribution calculator results:

• SIMPLE IRA Contributions: Contributions to a SIMPLE IRA should be at least 3% of yearly salary, or $5,000. If they’re more than $20,000, or 8% to 10% of your employee salary, a SEP IRA may be a better option. If you operate a small company and have workers, a 401(k) may be a better option.
• Employer Matching Is Required: Employer matching will almost certainly equal your employee contributions. Most workers will get between $1,000 and $3,000 in matching funds, but if you make a lot of contributions or have a lot of money, your matching may be lower.
• Growth Forecast for the Next Five Years As interest builds with fresh contributions, your SIMPLE IRA balance should rise quicker each year. If you make a lot of contributions, your account balance may be as much as your current yearly salary.

Contribution Limits for SIMPLE IRAs

Using a SIMPLE IRA, employees can use salary deferrals for pretax contributions up to $13,000. Employers offering SIMPLE IRAs are required to match 100 percent of employee deferrals up to at least 3 percent of their compensation or $13,000. Total Contribution Limits for SIMPLE IRAs for 2019 are $26,000 between employee deferrals and employer matching.

Contribution Limits for SIMPLE IRAs include:

• Deferrals for employees: up to $13,900 per year

Employees may contribute to SIMPLE IRAs tax-free if they defer up to 100% of their salary or $13,000, whichever is less.

• Employer Matching Program: up to $13,000 per year

Employers are obligated to match employee contributions up to 3% of yearly pay when using a SIMPLE IRA. Employers may match more than 3% of employee deferrals, but they must match at least 3% of yearly salary.

• Contributions to make up for lost time: up to $3,000 per year

Account holders over the age of 50 may contribute an additional $3,000 each year to their SIMPLE IRA until they reach the age of 7012.

IRA DEADLINES THAT ARE EASY TO FOLLOW

There are several IRA DEADLINES THAT ARE EASY TO FOLLOW for employers to implement a plan or for employees to participate. Using a SIMPLE IRA, employers must set up their plan between January 1st and October 1st of the year they take effect. Employees who participate must contribute between January 1st and December 31st (prior year contributions are not allowed).

IRA DEADLINES THAT ARE EASY TO FOLLOW for employees include:

• Deferred pay for employees The deadline is December 31st.

SIMPLE IRA participants must make all of their contributions before the end of the year.

Some IRA DEADLINES THAT ARE EASY TO FOLLOW for employers include:

• SET UP A SIMPLE IRA The deadline is October 1st.

Employers that desire to utilize a SIMPLE IRA must set up their plan before October 1st of the year in which it will be implemented. If you’re starting a SIMPLE IRA for a business that started after October 1st, you should start as soon as possible.

• Matching Contribution from the Employer 30 days following the employee’s deferral

Employers must match employee deferrals up to 3% of yearly pay when using a SIMPLE IRA. Within 30 days of the employee deferral being matched, the employer must make all matching contributions.

Consider a 401(k) plan instead of a SIMPLE IRA if you don’t think a SIMPLE IRA is the ideal retirement plan for you. To discover more, read our in-depth analysis of the best 401(k) providers.

How to Use the SIMPLE IRA Calculator

Annual contributions and obligatory employee matching are calculated using the SIMPLE IRA calculator. These figures are based on your yearly pay and deferral %, and the calculator also allows you to conduct the same calculation for workers.

The calculator also caps at Contribution Limits for SIMPLE IRAs of $13,000 from deferrals and another $13,000 in matching. However, your individual results may vary if your employer matches more than 3 percent in your SIMPLE IRA. The SIMPLE IRA contributions calculator above, however, provides results based on mandatory minimum employer matching of 3 percent.

INSTRUCTIONS FOR USING THE SIMPLE IRA CALCULATOR

Users must specify yearly salary and a deferral percentage to receive results from the SIMPLE IRA calculator. Employers may also include information about their workers’ remuneration if they have it. Based on SIMPLE IRA guidelines, these criteria are then utilized to determine SIMPLE IRA contributions and employer matching.

Employers may input the following information into the SIMPLE IRA contribution calculator:

1. Annual Compensation for Employers

The most important aspect in calculating necessary employer matching payments to your SIMPLE IRA is your annual salary. Employers are obligated to match employee deferrals up to 3% of yearly pay when using a SIMPLE IRA. Although your company may match more than 3%, the calculator estimates the minimum employer matching required.

2. IRA WITHOUT COMPLICATIONS Percentage of Deferrals

If you work for a company that offers a SIMPLE IRA, you may contribute as much as you like up to $13,000, but your employer is only obligated to match contributions up to 3% unless they opt to match more. Employers may also reduce their match to as low as 1%, but only for two years out of every five.

3. Plan Participant Compensation & Deferral Rates

You may enter information for up to three workers in addition to your own personal information. You may use the SIMPLE IRA calculator to figure out their maximum SIMPLE IRA contribution and obligatory employer matching based on their pay and deferral percentage.

Outputs of the SIMPLE IRA Calculator

The calculator calculates your SIMPLE IRA contribution, which is limited at $13,000, based on the information you put into the SIMPLE IRA contributions calculator above. Your statutory employer matching, which is restricted to $13,000 or 3% of yearly pay, is also calculated using the calculator. Finally, the calculator displays how your account is expected to expand in the future.

The following are the employee outcomes for the SIMPLE IRA calculator:

1. Contribution to a SIMPLE IRA by an employee on an annual basis

The yearly SIMPLE IRA contribution is the most important figure offered by the SIMPLE IRA calculator above. Multiply your SIMPLE IRA deferral % by your yearly pay to arrive at this figure. Employers must match employee deferrals when using a SIMPLE IRA, however the IRS restricts SIMPLE IRA contributions to $13,000 per year.

2. Mandatory Employer Matching in SIMPLE IRA

After the SIMPLE IRA calculator calculates your yearly SIMPLE IRA contributions, it utilizes that information to calculate the match that employers must pay. This amount is equivalent to your yearly SIMPLE IRA contributions of up to 3% of your salary or $13,000, whichever is less. Although your company may provide a higher match, the calculator only gives the minimum.

3. SIMPLE IRA 5-Year Growth Forecast

The SIMPLE IRA calculator’s final result is a forecast of how much your SIMPLE IRA account will increase over the next five years. This forecast is based on a five-year period with the same yearly contributions and employer matching, as well as a 5% annual return.

The following is the employer output for the SIMPLE IRA calculator:

1. Mandatory Employer-to-Employee Matching

The SIMPLE IRA calculator will enable you to input information for up to three workers if you specify that you have employees. You may determine your obligatory employer matching for up to three workers depending on employer matching regulations by giving their yearly income and deferral percentages.

EXAMPLE OF A SIMPLE IRA CALCULATOR

For an example of How to Use the SIMPLE IRA Calculator, consider Chad, an accountant for a manufacturing company. Chad’s company is small and has set up a SIMPLE IRA to provide retirement benefits for employees. Chad’s total annual compensation is $100,000, and he plans to defer 2 percent of his salary into his SIMPLE IRA.

Chad may figure up how much he’ll contribute based on a deferral percentage and how much his employer is obliged to match using the SIMPLE IRA calculator above. Chad’s company is not obligated to match contributions larger than 3% of employee pay, but must match employee deferrals up to 3%.

Contribution Limits for SIMPLE IRAs

Chad will contribute $2,000 to his SIMPLE IRA for the year, or 2% of his $100,000 in pay, based on his total yearly compensation. Unless his company has temporarily reduced their matching to as low as 1%, he will be compelled to match the $2,000 contribution.

Assuming Chad makes the same SIMPLE IRA contributions each year, receives the same company match, and earns a 5% annual return, Chad’s SIMPLE IRA will increase from $4,000 to almost $27,000 in the following five years.

Employee Example of a SIMPLE IRA Contribution

Assume Chad chooses to increase his deferral rate to 4%, and his company wants to figure out how much they’ll have to pay to his account. Chad may see that his mandated employer matching will climb to $3,000 from $2,000 using the SIMPLE IRA contribution calculator above.

Chad may also use this calculator to assist his employees figure out how much required minimum employer matching they’ll get depending on their wages and deferral percentages.

Total Contributions to a SIMPLE IRA

Employers that use a SIMPLE IRA may opt to match 100% of employee deferrals of more than 3%. To be compliant, the employer must at the very least match employee deferrals up to 3% of their income. Employers may reduce their match below 3%—to as low as 1%—but only for a total of two years in a five-year period.

What Exactly Is a SIMPLE IRA?

Small company owners may set up a SIMPLE IRA, or Savings Incentive Match Plan for Employees, to promote employee savings by matching their contributions. Employees may contribute up to $13,000 in pretax contributions to a SIMPLE IRA. Employers are obliged to match up to 3% of employee remuneration in employee contributions.

Employees make pretax contributions to their SIMPLE IRA by postponing a portion of their salary. Employees may pick how much they want to defer, but they are restricted to $13,000 every year. Within 30 days, business owners must match employee contributions. Employers may match employee contributions up to 3% of pay, and they can also reduce their match to 1%, but only twice in a five-year period.

If you own a small company and want to set up a SIMPLE IRA, you should be aware of the contribution limitations, requirements, and deadlines. Read our comprehensive guide to SIMPLE IRAs to discover more about how they function and how to utilize them.

When Should Employers Use a SIMPLE IRA?

A SIMPLE IRA is a great option for small company owners with several workers who wish to encourage them to save by matching contributions. SIMPLE IRAs are comparable to 401(k) plans, but they are far less expensive to manage. Employers only have to match contributions from participating workers when using a SIMPLE IRA.

A SIMPLE IRA may be very useful in the following situations:

• Small businesses with fewer than a dozen workers – If your company has four to fourteen employees, it’s definitely too large for a SEP IRA but not small enough to justify the expense of running a 401(k) (k).
• Profit-sharing contributions are unlikely to exist in businesses that are still developing since earnings are being reinvested. Employee contributions to a SIMPLE IRA that are matched by the employer might be a terrific retirement benefit plan.
• Businesses with frequent employee turnover — Business owners may contribute to a SIMPLE IRA on their own dime and are only obligated to match contributions made by participating workers.

Employees who have access to a SIMPLE IRA at work and want to see how much they’re scheduled to contribute each year may use the SIMPLE IRA calculator above. The calculator can also inform them how much in employer matching contributions they can anticipate, as well as how rapidly their account should grow over the next five years depending on their contributions and match.

Aside from these advantages for workers, the SIMPLE IRA calculator above is perfect for employers who want to figure out how much they may be required to contribute to employee accounts. Employers may calculate their mandatory employer matching payments for many workers using the calculator above, depending on yearly salary and deferral rates.

What the SIMPLE IRA Calculator Doesn’t Include

The SIMPLE IRA calculator above is quite helpful, but it does not account for a number of important considerations. For example, the findings of this calculator are based on the statutory minimum employer matching—it doesn’t take into account if your business matches contributions worth more than 3% of annual employee income.

Furthermore, the calculation above does not take into consideration businesses that reduce their SIMPLE IRA matching to as low as 1% on a regular basis. The calculator does not take into account catch-up contributions, which are available to account holders above the age of 50. Lastly, the calculator doesn’t indicate whether another type of account may be a better option for you or allow for higher contributions.

Pros & Cons of a SIMPLE IRA

When thinking about a SIMPLE IRA for a small business, there are several pros and cons for small business owners to consider. Contribution Limits for SIMPLE IRAs are much higher than Traditional IRAs. While contribution limits aren’t as high as 401(k)s, SIMPLE IRAs are much more cost-effective.

Employees may contribute up to $13,000 in pretax contributions to a SIMPLE IRA. SIMPLE IRA account users can’t withdraw money without penalty until they reach the age of 5912, but they don’t have to pay taxes until they do. Furthermore, individuals who contribute to a SIMPLE IRA may expect their employer to match 100% of their contributions up to 3% of their annual pay.

PROS OF A SIMPLE IRA

Small company owners who wish to promote employee deferrals without the expense of a 401(k) plan may consider a SIMPLE IRA. Employees aren’t obligated to contribute to a SIMPLE IRA, but those who do may put up to 100% of their earnings, or $13,000, into it.

Some PROS OF A SIMPLE IRA include:

• Employers must match employee deferrals up to 3% of total employee income when using a SIMPLE IRA to incentivize employee saving.
• There are no minimum deferrals — Employees are not obligated to contribute to a SIMPLE IRA if they do not choose to.
• SIMPLE IRAs are organized similarly to 401(k)s, but they don’t have the same administrative fees.
• Flexible investment possibilities – Individual retirement accounts (IRAs) allow account holders to invest in a variety of assets. It’s simple to set up a self-directed IRA with your account if you ever quit your business.

CONS OF A SIMPLE IRA

While SIMPLE IRAs provide several benefits, they also have a number of disadvantages that businesses should consider before establishing one for their small company. Employers that utilize a SIMPLE IRA must match employee deferrals, which is the largest drawback. Contribution limitations are also lower than those of a 401(k) (k).

CONS OF A SIMPLE IRA include:

• Employer matching – Employers are obligated to match employee deferrals up to 3% of employee salary when using a SIMPLE IRA. Employers may match up to 3% and can even match as little as 1%—but not for more than two years in a five-year period.
• Mediocre contribution limits – Contribution Limits for SIMPLE IRAs are $13,000, which is higher than the $6,000 allowed for a Traditional IRA but still lower than a 401(k).
• You won’t be able to borrow against it – You can’t borrow against an IRA, even a SIMPLE IRA, unlike a 401(k).

Alternatives to the SIMPLE IRA

You don’t get to choose whether or not you have access to a SIMPLE IRA if you work for a firm. Your company determines whether or not to provide a SIMPLE, and you decide whether or not to take part. There are, however, accounts that may be used in addition to a SIMPLE. Instead of a SIMPLE account, company owners might offer a variety of alternative accounts.

Three of the most common Alternatives to the SIMPLE IRA are:

1. SEP IRA

A SEP IRA is an employer-sponsored retirement plan that permits tax-free contributions of up to 25% of the employer’s revenue, or $56,000, whichever is lower. Employers may choose whether or not to contribute to their SEP account each year. Employers, on the other hand, are obligated to make contributions for workers that are equivalent to their own contributions based on yearly pay whenever they contribute to their own account.

SEP IRAs feature extraordinarily generous contribution limits, making them perfect for high-profit firms. SEP IRAs, on the other hand, are preferable for self-employed persons and firms with less than five workers since they require employers to finance contributions for their employees in addition to their own. Check out our comprehensive guide on SEP IRAs for more information.

2. Traditional Individual Retirement Account

A Traditional IRA is a plain and easy retirement plan. Employers do not set up traditional IRAs. Anyone who is qualified for a Traditional IRA may open one instead. A Traditional IRA allows investors to contribute up to $6,000 before taxes.

Traditional IRAs are ideal for freelancers and small company owners who don’t have a lot of income. Traditional IRA contribution limitations are minimal, but account users may contribute whenever they choose, and employers are not required to make contributions for their workers.

3. 401(k)

In terms of employer-sponsored retirement benefit programs, a 401(k) plan is the gold standard. Employees may contribute up to $19,000 in pretax contributions to their 401(k) plan via salary deferrals. Employers may then choose to match these contributions, although they can change their match as needed.

Companies with 15 to 18 workers or more should consider 401(k) programs. These firms may help employees save money by using a 401(k) plan, which allows employers to match employee contributions or even pay profit-sharing contributions of up to $18,000.

Consider ShareBuilder 401k for a low-cost, full-featured 401(k) plan that can grow with you. Their advisers and customer success managers will assist you in determining the best plan design, educating your employees, and answering any of your 401(k) inquiries. The one-time setup price is $750, and monthly administration expenses begin at $100. ShareBuilder 401k is a great place to start.

ShareBuilder 401k is a great place to start.

Conclusion

A SIMPLE IRA is a terrific account for small company owners who wish to provide retirement benefits to their employees while also encouraging them to save. You can see how much you’ll contribute to a SIMPLE IRA each year, the mandated minimum employer matching, and how quickly your account will grow over five years using the SIMPLE IRA calculator above.

If you’re a small business owner who thinks a SIMPLE IRA could be a good fit for your firm, you should learn more about how to put one up.

The “sep ira calculator” is a free SIMPLE IRA Calculator & Contribution Limits. The tool allows users to calculate their SEP, SIMPLE IRA, and 401(k) contribution limits.

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