What is a SIMPLE IRA and when does it make sense for a small business?

A SIMPLE IRA (Savings Incentive Match Plan for Employees) is a retirement plan built for businesses with 100 or fewer employees that want something easier than a 401(k). In 2025 employees can defer up to $16,500, plus a $3,500 catch-up at 50+, and the employer must either match up to 3% of pay or contribute a flat 2% for everyone. It's cheap to run and has no annual 5500 filing, which is its main appeal. The downsides: contribution limits are lower than a Solo or regular 401(k), and early withdrawals within the first two years carry a steep 25% penalty instead of the usual 10%. For a true solo with no staff, a Solo 401(k) almost always allows more saving. A SIMPLE shines when you have a few employees and want a low-maintenance plan with some matching.