2014 SIMPLE IRA Contribution Limits

How Much You Can Save in a SIMPLE IRA in 2014

Saving for retirement with an IRA. Catherine Lane/Getty Images

Whether you own a small business or work at one, you may be investing (or interested in investing) in a SIMPLE IRA. The plan's name is an acronym that stands for savings incentive match for employees. And how much you can contribute to this type of plan changes every year or two with inflation.

Looking for prior year limits?

SIMPLE IRA limits 2013
SIMPLE IRA limits 2012

SIMPLE IRA Contribution Limits 2014

In 2014, the contribution amount for SIMPLE IRAs remained $12,000. Of course, this limit could vary according to your employer's plan. You may also have access to a catch-up contribution if you are 50 years old or older. In 2014, this catch-up contribution limit remained at $2,500. If you were contributing to another plan in addition to a SIMPLE in 2014, the combined total you can put away could not exceed $17,500, which also happened to be the 401(k) maximum contribution limit in 2014.

Important Note: The annual contribution limits changed a little since 2014. If you are seeking SIMPLE IRA contribution limit information for more recent tax years you can check out the following link below:

2016 SIMPLE IRA Contribution Limits

2015 SIMPLE IRA Contribution Limits

How Does a SIMPLE Compare to Other Plans?

SIMPLE IRAs are just one of several types of self-employed and small business retirement plan options.

In many ways, it works like a typical workplace plan like a 401(k). You invest in the plan with your pre-tax salary, and contributions are invested in mutual funds, stocks, bonds, or other investments that you choose. The account is tax-deferred, meaning no taxes are taken on your investment growth until the money is withdrawn.

If you take it out before age 59 1/2, you will pay taxes plus, in most cases, you will be subject to a 10% penalty.

There are differences in how a SIMPLE IRA works. If you have ever had a 401(k), you know what a nice perk it is to have an employer match. With a SIMPLE IRA, the match is built in, up to 3% of salary. The employer may reduce this match to at least 1% in a given year, but not for more than two years in a five year period. And your employer must give you advance notice if they plan to reduce the contribution for the year.

The other option for employers is to make nonelective contributions of 2% across the board. Nonelective means that even if you the employee makes no contribution, your employer still adds 2% of your salary to the account each year. Employers may limit eligibility for 2% nonelective contributions to those employees with at least $5000 in their SIMPLE IRA. The salary limit for these contributions in 2014 was $260,000.

SIMPLE IRA Rollovers

SIMPLE IRA rollovers are also a bit more complicated that other types of rollovers. When you leave your job, you can only move a SIMPLE IRA if you have been in the plan for more than two years. If you've participated in the SIMPLE IRA for less than two years, you must either leave it where it is, or do a rollover into another SIMPLE IRA.

As you can tell, sometimes a SIMPLE IRA is anything but SIMPLE. But if you contribute to one through work, it's a fine place to save for retirement for the built-in match alone. For employers, a SIMPLE IRA could be the right choice only if you plan to match employee contributions.

If you are seeking more information on retirement saving account options for small businesses and self-employed individuals, check out the following resources:

Self-Employed Retirement Plans

6 Types of Retirement Plans You Should Know

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