Can I Contribute to My IRA Annuity If I Already Contribute to a Simple IRA?

You can contribute to both an IRA annuity and a SIMPLE IRA, but a SIMPLE impacts your IRA's tax deductibility.

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Many employees are covered by a retirement plan sponsored by their employers. These plans allow employees to invest sizable portions of their salaries in tax-deferred accounts. A SIMPLE IRA is a tax-deferred retirement plan that small employers may offer their employees. Employees can contribute to a traditional IRA account or annuity even if they already contribute to a SIMPLE IRA plan.


A traditional IRA provides participants with a tax-advantaged way to save for retirement. An individual’s contributions to a traditional IRA may be fully or partially deductible, depending on the circumstances. In addition, individuals are not taxed on the earnings and gains in a traditional IRA until the funds are distributed. A person can establish an IRA account with a bank, mutual fund or brokerage firm or set up an IRA annuity with a life insurance company.


A SIMPLE IRA is a savings incentive match plan for employees. Small companies with no more than 100 employees can offer this simplified plan to contribute toward the retirement savings of employees and owners. Although employees can opt to contribute via salary deductions, the law requires employers to make either matching or non-elective contributions. The employee and employer contributions are made to an IRA or IRA annuity established for each employee as part of a SIMPLE IRA plan.

You Can Contribute to Both

The IRS allows you to contribute to a traditional IRA, whether an annuity or account, even if you are covered by another retirement plan. Hence, you can contribute to both your employer-sponsored SIMPLE IRA and your personal IRA annuity. This also applies if you are self-employed or an employee-shareholder since the IRS treats these individuals as employees from an IRA perspective. However, if you or your spouse is covered by a SIMPLE IRA, you may not be able to fully deduct all of your IRA annuity contributions.

IRA Annuity Contribution Limits

You can contribute up to $5,000 a year for 2012 and $5,500 for 2013 to your IRA annuity. If you are at least 50 years old, you can contribute up to $6,000 for 2012 and $6,500 for 2013 in earned income per year. If you are covered by a SIMPLE IRA, you can still contribute these amounts, but they will not be fully tax deductible. If your compensation is high enough, you may not be able to deduct any of your IRA annuity contributions. However, your IRA annuity contributions in no way impact your SIMPLE IRA contribution limits.