SIMPLE plans and 401(k) plans do the same job with different ceilings. The SIMPLE caps employee deferrals at $17,000 for 2026 while the 401(k) allows $24,500, and the catch-up rules diverge even further. Enter your salary, deferral rate, and each employer's contribution setup, and this calculator shows what each plan saves per year and what the difference grows to by retirement.
A SIMPLE IRA plan and a 401(k) both take money out of your paycheck before income tax, invest it, and let it compound until retirement. The machines differ in who they are built for. A SIMPLE plan is reserved for employers with 100 or fewer employees who earned at least $5,000 in the prior year, under IRS Publication 560. It holds your savings in an IRA, skips most of the testing and reporting that 401(k) plans face, and requires no annual Form 5500 filing. A 401(k) can be sponsored by any employer, carries higher contribution ceilings, and buys that ceiling with more administration.
The second structural difference is the employer contribution. In a SIMPLE plan the employer must contribute every year, either a dollar-for-dollar match on the first 3 percent of pay or a flat 2 percent of pay for every eligible employee. In a 401(k) a match is optional, and roughly half of plans that offer one use a formula close to 50 cents on the dollar up to 6 percent of pay. Notice what happens when a 3 percent SIMPLE match meets a 50-percent-up-to-6-percent 401(k) match: both cost the employer 3 percent of salary. When the employer dollars are equal, the only thing separating the two plans is the employee deferral ceiling.
Variables in plain terms. Deferral% is the share of salary you save, applied to both plans for a fair comparison. Catch-up is $8,000 for a 401(k) and $4,000 for a SIMPLE once you turn 50, per the 2026 IRS cost-of-living adjustments in Notice 2025-67. The 401(k) match formula matches MatchRate% of your deferral only up to MatchUpTo% of salary, and never more than you actually deferred. The future value line assumes the annual savings are contributed evenly each month and grow at the expected return r.
Take the default setup: $120,000 salary, 15 percent deferral, 20 years to retirement, 7% return. In the 401(k) the deferral is $18,000 and the match adds $3,600, for $21,600 a year. In the SIMPLE the same 15 percent would be $18,000, but the $17,000 cap cuts it to $17,000, and with the 3 percent match the total lands at $20,600. One thousand dollars a year goes missing into the SIMPLE's ceiling.
Compound growth makes that small leak loud. Over 20 years the 401(k) route reaches $913,565 while the SIMPLE route reaches $871,271, a gap of $42,295. The gap is not linear: it is $5,933 after 5 years, $14,254 after 10, and $25,925 after 15, because each year's missing $1,000 loses its own compounding. Raise the deferral to 20 percent and the annual gap widens to $7,000, which grows into a $296,063 shortfall by year 20. The break point for a 15 percent saver is a salary of about $113,333; below it both plans hold the full deferral and the totals tie exactly, which the calculator confirms at a 10 percent deferral with $12,350 saved under either plan.
| Deferral | 401(k) saved/yr | SIMPLE saved/yr | Gap after 20 years |
|---|---|---|---|
| 6% | $10,800 | $10,800 | $0 |
| 10% | $15,600 | $15,600 | $0 |
| 15% | $21,600 | $20,600 | $42,295 |
| 20% | $27,600 | $20,600 | $296,063 |
| 22% | $28,100 | $20,600 | $317,210 |
The table holds the default salary, match setups, and 7% return fixed and moves only the deferral rate. The first two rows are the quiet majority: most savers never hit either cap, and for them the plan choice is a wash numerically. The gap only opens once deferrals press against the $17,000 SIMPLE ceiling. Age 50 changes the picture again, because the 401(k) catch-up of $8,000 doubles the SIMPLE's $4,000: a 20 percent saver at the default salary who is over 50 would see a $3,000 annual gap under the catch-up limits and a $126,884 shortfall over the same 20 years.
Numbers alone mislead here, because the SIMPLE's advantages are administrative. Employers skip nondiscrimination testing, skip the Form 5500, and run the plan through an IRA custodian at a fraction of a 401(k)'s cost, which is why many small businesses offer nothing else. The mandatory employer contribution is also a feature for employees: even a non-saver gets 2 percent of pay in a nonelective SIMPLE, something no optional 401(k) match guarantees. For a saver whose deferral sits comfortably under $17,000 and whose employer pays a full 3 percent, a well-invested SIMPLE is financially equivalent to the 401(k) at the same employer cost, as the tie rows in the table show.
The 401(k) counters with room and flexibility: $7,500 more in base deferrals, double the catch-up, a $360,000 compensation cap for match purposes, loans in many plans, and Roth options. It also scales, which is why the comparison most often resolves into a life-stage question. Early career at a small firm, the SIMPLE costs you little or nothing. Late career, or after a raise pushes deferrals past $17,000, the ceiling starts charging real money, and the rollover path to a 401(k) or IRA after the two-year SIMPLE holding period is the standard exit.
Whichever plan you land in, the accumulation math is the same engine. The compound interest calculator projects any monthly contribution over decades, the retirement withdrawal calculator works the other end and shows what a balance can safely pay out once you stop saving, and the take-home pay calculator shows the immediate trade, since every deferral dollar reduces this year's taxable paycheck. Together they cover contribute, grow, and withdraw.
SIMPLE plans are limited to employers with no more than 100 employees who earned at least $5,000 in the prior year, per IRS Publication 560. Any employer can sponsor a 401(k), but the administration, testing, and paperwork cost more. That is the trade in a nutshell: the SIMPLE is the low-maintenance plan for small businesses, and the 401(k) is the higher-ceiling plan that costs more to run.
Congress set a lower cap for SIMPLE plans deliberately, betting that small employers would not run high-end plans anyway. For 2026 the IRS set the SIMPLE salary-deferral limit at $17,000 and the 401(k) limit at $24,500, a $7,500 gap. The catch-up limits are also asymmetric: employees 50 and over can add $8,000 in a 401(k) but only $4,000 in a SIMPLE.
Yes, and this is the SIMPLE's quiet advantage. Under IRS rules the employer must either match employee deferrals dollar for dollar up to 3 percent of compensation, or contribute 2 percent of compensation for every eligible employee whether they save or not. A standard 401(k) match is entirely optional. If your employer contributes the full 3 percent match, the employer cost is identical to a common 401(k) setup of a 50 percent match on the first 6 percent.
For 2026, the 401(k) catch-up for ages 50 and over is $8,000 on top of the $24,500 limit, while the SIMPLE catch-up is $4,000 on top of $17,000. Workers aged 60 through 63 get a larger enhanced catch-up under SECURE 2.0: $11,250 in a 401(k) versus $5,250 in a SIMPLE. Over a career, the extra catch-up room is one of the biggest dollar differences between the two plans.
Whenever the deferral stays under the SIMPLE cap and both employers pay the same 3 percent of salary, the two plans produce identical annual savings. At 15 percent deferral that break point is a salary of about $113,333, because 15 percent of that salary equals the $17,000 SIMPLE limit. Above it, every additional deferral dollar only fits in the 401(k), which is why the calculator's gap stays at zero for moderate salaries and then opens sharply.
Yes. Rollovers from a SIMPLE IRA to an employer plan or to a traditional IRA are allowed, but distributions within two years of first participating are penalized more heavily: if you are under 59 and a half, an early distribution in that window carries a 25 percent additional tax instead of the usual 10 percent. After the two-year mark, rolling a SIMPLE IRA into a new employer's 401(k) or an IRA is straightforward, which matters if you leave a small employer for a company with a 401(k).
All calculation logic on this page is implemented from the primary documents below. Each one is listed with the figure it supplies, so any rate or threshold in the result can be traced back to its published source.
Contribution limits and plan rules for the current tax year on every page.