SIMPLE IRA

A SIMPLE IRA is the retirement plan many small businesses offer instead of a 401(k). This calculator projects how your deferrals, your employer's money and investment growth add up by retirement.

How the calculation works

The projection runs year by year. Each year your deferral is the chosen percentage of salary, capped at the IRS limit: $17,000 for 2026, plus a $4,000 catch-up from age 50, or $5,250 instead if you are 60 to 63. The employer contribution is then added, the whole balance grows at your assumed annual return, and your salary rises by the growth rate you enter.

Every SIMPLE IRA employer must pick one of two formulas. With a match (input = 1), the employer puts in a dollar for every dollar you defer, up to 3% of your pay, so the match equals the smaller of your deferral or 3% of salary. With a nonelective contribution (input = 0), the employer pays 2% of salary to every eligible employee, whether or not they defer anything.

Inputs: annual salary ($), your deferral (% of salary), current balance, expected return (% per year), salary growth (% per year), years until retirement and catch-up status. Contributions are assumed to land at the end of each year and growth compounds annually. Taxes, fees and inflation are not modeled, and the 2026 limit is held constant rather than indexed.

Worked example

Salary $60,000, deferral 5%, employer match up to 3%, 7% return, 3% salary growth, 20 years, starting balance $0. In year one you put in $3,000 and your employer adds $1,800 (3% of $60,000), for $4,800 total. Over 20 years your deferrals come to about $80,611, the employer adds $48,367 and investment growth contributes $118,651, for a projected balance of about $247,629. If the employer uses the 2% nonelective option instead, it contributes $1,200 in year one and the projection drops to about $216,675.

Things to keep in mind

• Under a match plan, defer at least 3% of pay. Anything less leaves part of the employer's dollar-for-dollar money on the table.
• IRS limits are adjusted every year. Some plans, mainly at employers with 25 or fewer employees, allow a higher deferral limit ($18,100 for 2026); check your plan documents.
• Withdrawals before age 59½ within the first two years of participation can trigger a 25% additional tax instead of the usual 10%.
• An employer may lower the match to as little as 1% in up to two years out of any five, which would put your real balance below this projection.
• A 7% return is an assumption, not a promise. Run a cautious 4–5% scenario as well to see the range.