What Are The Changes To The Simple Ira In 2025

Jordan Emanuel

2 min read

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09-12-2024

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The SIMPLE IRA (Savings Incentive Match Plan for Employees) remains a popular retirement savings plan for small businesses and self-employed individuals due to its simplicity and relatively low administrative burden. However, contribution limits and other regulations are subject to annual adjustments for inflation. While the official 2025 contribution limits won't be finalized until late 2024 by the IRS, we can project likely changes based on historical trends and current economic indicators.

Projected Changes for 2025

It's important to preface this by stating that these are projections based on past inflation adjustments and are not official IRS figures. The IRS will release the official numbers closer to the end of 2024. That being said, we can anticipate the following potential adjustments:

Contribution Limits:

• Employee Contributions: The maximum amount an employee can contribute to a SIMPLE IRA is currently capped. We can expect this limit to increase slightly in 2025 to account for inflation. The exact amount will depend on the Consumer Price Index (CPI) data released throughout the year.

• Employer Contributions: Employers can make matching contributions or nonelective contributions (contributions made by the employer regardless of employee contributions). These limits are also subject to annual adjustments. We expect a modest increase here as well, reflecting the inflationary pressures on the economy. Keep in mind that employer contributions are usually tied to a percentage of employee compensation or a specific dollar amount.

Age 50+ Catch-Up Contributions:

Individuals aged 50 and older are typically allowed to make additional catch-up contributions to their SIMPLE IRAs. This amount is also subject to annual adjustments and will likely see a small increase in 2025.

What to Expect and How to Prepare

While we can project some changes, the precise figures for 2025 SIMPLE IRA contribution limits will only be released by the IRS in late 2024. Therefore:

• Stay Informed: Keep an eye on official IRS announcements and updates regarding retirement plan limits. The IRS website is the best source for this information.

• Consult a Financial Advisor: A financial advisor can help you understand how these changes might affect your retirement savings strategy and make adjustments as needed.

• Plan Ahead: Don't wait until the end of the year to start contributing to your SIMPLE IRA. Consistent contributions throughout the year maximize the benefit of compounding returns.

Disclaimer: This information is for general knowledge and informational purposes only, and does not constitute financial advice. Always consult with a qualified financial advisor before making any decisions about your retirement savings.