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What is a SIMPLE Roth IRA?

A SIMPLE Roth IRA is a Roth version of a SIMPLE IRA that allows eligible employees to make after-tax salary deferral contributions through their employer’s SIMPLE IRA plan. This option became available under the SECURE 2.0 Act and must be specifically adopted by the employer before employees can use it.

With a SIMPLE Roth IRA, employees pay income taxes on their contributions at the time the money is earned. In return, qualified withdrawals in retirement are generally tax-free, including both contributions and investment earnings, as long as IRS requirements are met. These requirements typically include satisfying the Roth five-year holding rule and reaching age 59½ or qualifying for another approved exception.

Although the tax treatment is different, a SIMPLE Roth IRA is still part of a SIMPLE IRA plan. Standard SIMPLE IRA rules still apply, including eligibility requirements, annual contribution limits, and certain early withdrawal restrictions.