A SIMPLE IRA is the retirement plan a small business picks when a 401(k) is too expensive to administer. The rules are simple but the arithmetic is not: your deferral is capped at $16,500, the employer match is capped at 3% of pay and at your own deferral, and a $360,000 compensation ceiling quietly shrinks both at high income. This works out your 2026 numbers.
Enter net self-employment income for an owner, or gross salary for a W-2 employee. Everything is keyed to 2026 limits.
Every figure below is produced by the same formula the calculator uses. The last row is the one people get wrong: at $400,000 of net income, the $360,000 compensation cap applies, so neither the deferral percentage nor the 3% match is computed on the full amount.
| Scenario | Compensation | Your deferral | Employer 3% match | Total |
|---|---|---|---|---|
| Sole proprietor, $60k net SE income, puts in 10% | $60,000 | $6,000 | $1,800 | $7,800 |
| $120k net SE income, age 45, deferring 15% | $120,000 | $16,500 | $3,600 | $20,100 |
| Age 52, $200k net SE income, deferring 10% | $200,000 | $20,000 | $6,000 | $26,000 |
| $400k net SE income, age 40 - comp cap bites | $360,000 | $16,500 | $10,800 | $27,300 |
Catch-up only applies from the year you turn 50. The 3% match never exceeds your own deferral — if you contribute 1% of pay, the employer adds 1%, not 3%.
Cap 1 — the deferral limit. For 2026 you can defer $16,500 of pay, plus $3,500 if you are 50 or older ($20,000 total). This is per person, not per job: if you hold two SIMPLE IRAs, the limit is shared.
Cap 2 — the employer formula. A traditional SIMPLE requires either a dollar-for-dollar match up to 3% of compensation, or a 2% nonelective contribution for everyone regardless of whether they defer. The match is also bounded by what you actually defer.
Cap 3 — the $360,000 compensation ceiling and the $72,000 total. Compensation above $360,000 does not count toward either the deferral percentage or the match. The combined employer-plus-employee total cannot exceed $72,000 in 2026.
One quirk worth knowing: your own deferral is exempt from FICA and self-employment tax, but the employer contribution is not deductible against SE tax for a sole proprietor — it is deducted on Schedule 1 instead. That is why the calculator reports the SE-tax saving only on the deferral line.
At the same income, the three small-business plans produce very different totals. A SEP IRA allows up to 25% of compensation but has no employee deferral, so a $120,000 earner tops out near $30,000. A solo 401(k) allows the full $23,500 deferral plus a 25% employer piece, which is usually the largest number. A SIMPLE IRA sits in between, and its real advantage is administrative: no annual Form 5500, no nondiscrimination testing, and payroll can usually handle it.
The crossover that matters: once net self-employment income passes roughly $80,000 to $100,000, a solo 401(k) almost always allows a larger contribution than a SIMPLE. Below that, the SIMPLE's 3% match can beat a SEP's 25% employer-only contribution because you are allowed to add your own deferral on top.
The plan is designed for businesses with 100 or fewer employees that want a retirement benefit without the testing and filing burden of a 401(k). In practice that means dental practices, contractors with a handful of crew, restaurants, and family businesses where the owner is also the primary saver.
The trap for owners is the mandatory employer contribution: you must fund the match or the 2% nonelective for every eligible employee, not just yourself. A five-person shop on a 3% match is committing to roughly 3% of total payroll every year the plan exists, whether or not the staff defer anything (under the nonelective formula) or only to the extent they do (under the match formula).
⚠️ Estimate only. This calculator uses published 2026 figures and general rules; your situation may involve state rules, phase-outs, or plan-specific terms not modeled here. Confirm any decision with a licensed professional or the relevant official publication before acting.