A SIMPLE IRA (Savings Incentive Match Plan for Employees) is a retirement plan designed for small businesses with 100 or fewer employees. It's easier and less expensive for employers to administer than a traditional 401(k), while still providing valuable retirement benefits. As an employee, you can contribute up to $16,500 in 2025 ($20,000 if you're 50 or older), and your contributions are pre-tax, reducing your taxable income. Your employer must contribute too—either matching your contributions up to 3% of your salary or making a 2% contribution for all eligible employees, regardless of whether they participate.

SIMPLE IRAs have immediate vesting, meaning all employer contributions are yours right away. The trade-off: contribution limits are lower than 401(k)s, and there's a steep 25% penalty on withdrawals in the first two years of participation (versus the standard 10%). If you work for a small business, a SIMPLE IRA offers a straightforward way to build retirement savings with employer support, even if a full 401(k) plan isn't available.