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Pursuing a career in nursing can be both personally fulfilling and financially rewarding, but it also comes with significant upfront education costs. The price of nursing school varies widely depending on the degree level, institution type, and length of study. Understanding these costs ahead of time can help you plan realistically, compare programs, and avoid unnecessary debt.

Below we break down the average cost of nursing school by credential, explore additional fees students often overlook, and outline common ways nursing students pay for their education.

Typical Nursing School Costs and Salaries

Nursing education costs generally increase with each academic level, but so does earning potential. While you can access entry-level nursing roles with an associate degree, advanced degrees open the door to leadership, specialization, and higher salaries.

💡 Quick Tip: You can fund your education with a competitive-rate, no-fees-required private student loan that covers up to 100% of school-certified costs.

Associate Degree in Nursing (ADN)

An Associate Degree in Nursing (ADN) is one of the fastest and most affordable ways to become a registered nurse (RN). ADNs are offered by community colleges, private technical colleges, and some four‑year institutions, and typically take around two years to complete.

While ADN graduates often qualify for similar entry-level health care jobs as those with a Bachelor of Science in Nursing (BSN), the salary is generally lower and there may be less opportunity for advancement. Also, some hospitals require nurses to have a BSN.

Average cost of an ADN at a public school:

•   Annual tuition and fees: $3,000 – $12,000

•   Annual room and board: $7,000 – $9,000

•   Total cost for an ADN: $20,000 – $42,000

Average cost of an ADN at a private school:

•   Annual tuition and fees: $15,000 – $30,000

•   Annual room and board: $10,000 – $13,000+

•   Total cost for an ADN: $50,000 – $86,000+

Average ADN salary: $81,000

Bachelor of Science in Nursing (BSN)

A Bachelor of Science in Nursing is a four-year undergraduate degree that prepares students for Registered Nurse (RN) licensure and offers broader training in leadership, research, and public health. BSN programs are offered at public and private colleges nationwide.

BSN-prepared nurses often have access to more job opportunities, higher starting salaries, and greater long-term earning potential compared to nurses with ADNs.

Average cost of a BSN at a public school:

•   Annual tuition and fees: $15,000 – $30,000

•   Annual room and board: $12,000 – $14,000

•   Total cost for a BSN: $108,000 – $176,000

Average cost of a BSN at a private school:

•   Annual tuition and fees: $30,000 – $60,000+

•   Annual room and board: $13,000 – $16,000

•   Total cost for a BSN: $172,000 – $304,000+

Average BSN salary: $99,000

Master of Science in Nursing (MSN)

A Master of Science in Nursing (MSN) is a graduate-level degree that prepares registered nurses for advanced clinical practice, leadership, education, or administrative roles. For many nurses, an MSN is a gateway to advanced practice specialities, such as nurse practitioner, nurse midwife, clinical nurse specialist, or nurse anesthetist.

Depending on the school and entry point, students can pursue an MSN after a BSN or via an RN-to-MSN bridge program designed for nurses with an associate degree.

MSN programs typically take two years of full-time study to complete. Part-time options are also available for working nurses.

Average cost of an MSN at a public school:

•   Annual tuition and fees: $10,000 – $30,000

•   Total cost for an MSN degree: $20,000 – $60,000

Average cost of an MSN at a private school:

•   Annual tuition and fees: $20,000 – $50,000+

•   Total cost for an MSN degree: $40,000 – $100,000+

Average MSN salary: $109,000

Doctor of Nursing Practice (DNP)

A Doctor of Nursing Practice (DNP) is an advanced degree for nurses who want to reach the highest level of clinical practice. Unlike research-focused doctoral degrees (such as a Ph.D. in Nursing), the DNP prepares nurses for leadership roles by focusing on applying research to improve patient care, quality, and health care systems,

DNP programs typically require two to three years of full-time study beyond a BSN, though some schools offer BSN-to-DNP pathways that can vary in length. Part-time options are also available for working nurses.

Average cost of a DNP at a public school:

•   Annual tuition and fees: $20,000 – $45,000+

•   Total cost for a DNP (three years): $60,000 – $135,000+

Average cost of a DNP at a private school:

•   Annual tuition and fees: $30,000 – $80,000+

•   Total cost for a DNP (three years): $90,000 – $240,000+

Average DNP salary: $117,000

Other Fees While Studying to Be a Nurse

Tuition is only one part of the total cost of nursing school. Students also need to budget for a variety of additional expenses that can add up quickly over the course of a program.

Uniforms, Lab Fees, and Equipment

Nursing students are typically required to purchase textbooks, uniforms (scrubs), a stethoscope, and other supplies, which can add to the total cost of your education. Nursing schools also typically charge lab or clinical fees to fund the specialized equipment and simulation centers necessary for hands-on training.

Here’s a look at how these costs break down:

•   Lab fees: $100 – $500 per course

•   Books and supplies: Around $625 per term

•   Uniform: A set of scrubs can cost anywhere from $30 to over $100, depending on brand, fabric, and features.

Licensing Exam and Review Course Costs

After completing a nursing program, graduates must take and pass the NCLEX-RN licensing exam, which runs a couple of hundred dollars. Many graduates also invest in NCLEX review courses to increase their chances of passing on the first attempt. In addition, graduates typically need to pay for state licensure applications, background checks, and fingerprinting.

Here’s what you can expect to pay before you can start practicing:

•   NCLEX-RN registration fee: $200

•   NCLEX prep: Prep books run $30 – $100; online review courses are $100 – $500; live prep classes range from $300 to $1,000

•   State licensing fees: $50 – $350+ depending on the state

•   Live scan fingerprinting: $50 – $80

•   FBI Criminal Background Check: $20 – $50

How to Pay for Nursing School

Paying for nursing school can feel overwhelming, but there are many options to help manage costs, including federal and private student loans, scholarships, grants, and graduate student loans.

Federal Student Loans

Federal student loans are a common funding option for nursing students. Undergraduate students may qualify for:

•   Direct Subsidized Loans: Offered to students with financial need, the government pays interest while you’re in school and for six months after graduation.

•   Direct Unsubsidized Loans: These are not based on financial need and are available to most undergraduate students.

Graduate nursing students are eligible for only Direct Unsubsidized Loans.

You can apply for federal aid — including federal student loans, scholarships, grants, and work-study — by completing the Free Application for Federal Student Aid (FAFSA®) every year.

When it comes to paying federal loans back, many nurses choose to work for qualifying nonprofit or government organizations to take advantage of the federal Public Service Loan Forgiveness program, typically pairing it with an income-based repayment plan.

💡 Quick Tip: Even if you don’t think you qualify for financial aid, you should fill out the FAFSA form. Many schools require it for merit-based scholarships, too.

Scholarships and Grants

Scholarships and grants for nurses provide valuable financial assistance to help cover the cost of education without the need for repayment. Many programs are available for nursing students at all levels, including undergraduate and advanced degrees.

Scholarships are often merit-based, while grants are typically need-based. Organizations such as the American Association of Colleges of Nursing and local health care providers offer funding opportunities. These resources reduce financial burdens, making a nursing career more accessible and affordable.

Recommended: College Scholarship Finder

Private Student Loans

Private student loans can help cover remaining costs when federal aid and scholarships are not enough. These loans are offered by banks, credit unions, and online lenders.

Private loans allow borrowers to cover up to the total cost of attendance (minus other aid), offering higher borrowing limits than federal loans, which have annual and aggregate caps. However, rates are set by individual lenders and depend on the credit profile of the borrower (or their parent cosigner). A higher score increases the likelihood of receiving the lowest available rate. Private student loans also lack federal borrower protections, such as income-driven repayment and forgiveness programs.

Recommended: Student Loan Payment Calculator

Work-Study Programs and Employer Tuition Assistance

Some nursing students qualify for the Federal Work-Study program, which provides part-time employment to help cover education expenses. These jobs are often located on campus or within health care settings.

In addition, many hospitals and health care systems offer tuition assistance or reimbursement programs for employees pursuing nursing degrees. These benefits may require a work commitment after graduation but can significantly reduce out-of-pocket costs.

Financial Aid Options Specific to Nursing Students

Beyond traditional financial aid, nursing students may qualify for specialized programs designed to address health care workforce shortages.

Nurse Corps Loan Repayment Program

The Nurse Corps Loan Repayment Program is a U.S. federal program that helps registered nurses and advanced practice nurses repay a significant portion of their student loans in exchange for a work commitment. Participants are required to work for at least two years at an eligible health care facility with a critical shortage of nurses or at an eligible nursing school as nurse faculty.

State-Based Forgiveness Programs

Many states offer loan repayment or forgiveness programs for nurses who work in designated shortage areas or high-need specialties. Program requirements and benefits vary by state, but they often provide substantial financial relief.

It’s worth researching options in your state or the state where you plan to practice to determine eligibility and application timelines.

The Takeaway

The cost of nursing school varies based on the degree level you pursue and the institution you choose. While an ADN offers a lower-cost entry into nursing, advanced degrees like MSN or DNP require a greater financial investment but can lead to higher salaries and expanded career opportunities.

By understanding tuition costs, planning for additional fees, and exploring all available aid options, you can make an informed decision that balances education costs with future earning potential. With careful planning, nursing school can be a worthwhile investment in a stable and in-demand career.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

FAQ

How much is nursing school for four years?

The cost of a four-year Bachelor of Science in Nursing (BSN) degree varies significantly by institution. If you attend a public school as an in-state student, the total cost typically ranges from $108,000 to $176,000, including annual tuition, fees, and room and board. If you attend a private institution, the total cost is generally higher, ranging from $172,000 to $304,000.

Is nursing school worth it financially?

Yes, nursing school is generally considered a worthwhile financial investment. Registered nurses can earn a solid median salary, often with strong job security and benefits. While tuition and time costs can be significant, especially for BSN, MSN, or DNP degrees, many nurses recoup their investment within a few years of working. Opportunities for overtime, specialization and advanced practice roles can further increase earning potential over time, making nursing a financially sustainable and flexible career choice.

What is the average debt after nursing school?

The median student loan debt for graduates with a Bachelor of Science in Nursing (BSN) is $23,506.

What financial aid is available specifically for nursing students?

Nursing students can access federal student loans (Direct Subsidized and Unsubsidized), private student loans, and various scholarships and grants specifically for nursing. Specialized options include the federal Nurse Corps Loan Repayment Program, which offers loan forgiveness for nurses who commit to working in critical shortage facilities, and various state-based forgiveness programs that incentivize practice in high-need areas.

How do nursing salaries compare to the cost of education?

Nursing salaries generally compare favorably to the cost of education, especially over the long term. While tuition for nursing programs can be significant, particularly for bachelor’s or advanced degrees, nurses often earn stable, competitive salaries with strong job security. Many graduates recoup their education costs within a few years of working. Financial aid, scholarships, and employer tuition reimbursement can further reduce upfront expenses, improve the overall return on investment for a nursing education.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

SoFi Bank, N.A. and its lending products are not endorsed by or directly affiliated with any college or university unless otherwise disclosed.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SOISL-Q126-002

According to the Education Data Initiative, the current cost of a bachelor’s degree averages $38,270 per year, or $153,080 for four years. However, this expense can vary widely, depending on whether a student attends a public or private school and other factors. Learn more about how much a bachelor’s degree costs here, as well as ways to make your education as affordable as possible.

Average Cost of a Bachelor’s Degree in the US

As noted above, the current cost of a college degree in the U.S. is approximately $153,080 over four years. This figure includes books and supplies, plus daily living expenses. However, this average doesn’t tell the full story. Consider these data points from the Education Data Initiative:

•   The typical student attending a public, four-year school and paying in-state tuition will spend $27,146 per year, or $108,584 for their four-year degree. This includes on-campus housing.

•   If a student attends a private, nonprofit university, they are likely to spend $58,628 per year if living on campus, which equals $234,512 over four years.

It’s worth noting that college costs have risen sharply in recent years, doubling since the start of the 21st century.

Tuition Differences by School Type and Residency

When thinking solely about the cost of tuition, you’ll find that it currently averages $9,750 per year for in-state students, and $28,386 for out-of-state students at a public university. At a private university, the annual tuition rises to $38,421 per year.

Here’s how this information looks in chart form:

Common Costs of a Bachelor’s Degree

If you want to get a handle on the total cost of a bachelor’s degree, it’s wise to consider all of the various costs associated with this phase of your life. You’ll want to budget for more than tuition and room and board. Consider the following categories that need to be accounted for.

Tuition, Living Expenses, and Hidden Costs

When developing a list of expenses for your time spent earning a bachelor’s degree, you’ll want to account for the basics:

•   Tuition and various fees

•   Books and supplies

•   Room and board

But plenty of other costs can crop up. Think about the following:

•   Will you need to buy a laptop or new mobile device? Will you need to pay for a cell service plan?

•   How will you pay for incidentals such as transportation around your college town, a large iced coffee to get you going in the mornings, cool clothes you find at the local vintage store, haircuts, and laundry expenses?

•   When the holidays roll around, will you need airfare and other costs covered to get home to your family?

•   Will you be keeping a car on campus?

These “hidden costs” can add up quickly and make a significant difference in your college budget.

Cost Differences by Major and Program Length

Not all college courses of study are equally expensive. Some programs can lead to steep costs (lab fees, perhaps, or studio art supplies), and the time it takes to get certain degrees can vary, impacting the price you pay.

High Cost vs Lower Cost Degree Paths

As hinted at above, certain majors can be pricier than others. For instance, STEM (science, technology, engineering, and mathematics) and fine arts degrees can be costlier than, say, a liberal arts degree, such as majoring in English or History. The reason you may pay more for a STEM, preprofessional (think medicine and nursing) or fine arts degree is that they can involve specialized equipment and lab sessions.

If you’re a budding electrical engineer or bio major, you will likely be doing considerable hands-on work with pricey materials. (You may snag one of the highest-paying jobs in the U.S. after graduation as well.) Someone who is training to be a fine artist may also pay more for materials; they are going to need to afford plenty of paints, canvases, photographic supplies, and/or clay.

Don’t overlook the fact that certain degrees can be five in the making. For instance, a B.Arch degree, for aspiring architects, is typically a five-year course of study. That can significantly increase your costs compared to those of your friend who’s a Sociology major and will graduate after four years.

And of course, some educational institutions are simply more expensive than others. Some schools are relatively low-cost, and then there are the most expensive colleges in the country.

Recommended: Undergraduate vs Graduate Student Loans

Ways to Reduce the Cost of a Bachelor’s Degree

All this talk about how much a bachelor’s degree can cost may make you curious about ways to reduce the cost of your education. Take a closer look at these tactics.

Financial Aid

The majority of college students currently receive some financial aid — about 85% of first-year, full-time undergrads. This aid can include scholarships, grants, work-study, and federal and private student loans. Federal student loans typically charge lower interest rates than private loans and offer certain borrower protections, such as forbearance and deferment.

Colleges, universities, and state agencies use the FAFSA, or Free Application for Federal Student Aid, to assess a student’s financial aid eligibility. The FAFSA can be completed online. It’s recommended that you submit your completed FAFSA as soon as possible after it becomes available (typically October 1 of the year prior to the academic year). That’s because state aid is often given out on a first come, first served basis.

Transferring Colleges

Some students strategically pursue their education at multiple colleges to save money. Here’s how this can work: You start your degree at a lower-priced community college and check off required classes for your major. Then you transfer to a four-year college or university to finish your degree. If you live at home while at community college, you can save even more.

An important point about this tactic is to make sure in advance that your community college credits will be transferable to your next educational institution. Otherwise, you might wind up paying twice for, say, Intro to Psych and Statistics 101.

Online Programs

While not for everyone, online courses and programs can help students save money and enjoy learn-from-anywhere convenience. Tuition for a year of online college can save you $6,765 compared to on-campus classes, according to the Education Data Initiative. That’s $27,000 over four years.

The same organization cites that the average cost per credit hour for an online bachelor’s degree program is $509 for the 2025-26 school year, considerably less than the $791 per hour charged by a standard four-year educational institution.

While the financial savings and ease of online education can be enticing, keep in mind that these classes can have their downsides, too. Some students may have trouble engaging or staying focused. Others may feel as if they aren’t getting as many networking and social opportunities in a virtual classroom.

Is a Bachelor’s Degree Worth the Cost?

In recent years, many people have questioned whether a bachelor’s degree is worth it. We’ve all seen stories of entrepreneurs who have skipped college and done well. Some have done even better than their peers who pursued a degree and then needed to pay off their student debt in the form of federal and/or private student loans.

Here are some facts to think over as you weigh the pros and cons of going to college.

Earnings, Debt, and Employment Outcomes

Just like owning a home, earning a college degree is part of the American dream, and for good reason. According to a November 2025 report by the Brookings Institution (a nonprofit public policy organization), the average degree-holder earns $8,000 more per year than his non-degreed peers.

And that’s after the cost of student debt is accounted for. If you work for 40-some years after graduation, that $8,000 a year becomes a significant advantage, helping you realize your financial goals. The Association of Public & Land Grant Universities (APLU) puts the figure higher still, saying degree-holders typically earn an 86% higher salary than those without a diploma. This can translate into earnings $1.2 million higher over a lifetime.

That said, the amount typically borrowed in pursuit of a bachelor’s degree averages $30,000, which can be a considerable amount of student debt. (Student loan interest rates and terms are important variables when comparing loans and hunting for the best option.) This debt can trigger financial strain and budgeting challenges, which are considerations to be aware of when deciding whether or not to pursue a bachelor’s degree.

Worth noting: By using a student loan calculator as you consider your options, you can gain a clear picture of what kind of debt payments you would owe and for how long.

One other angle to contemplate is career opportunity. Traditionally, college grads are half as likely as non-degree holders to be unemployed, per the APLU. However, that finding may be in flux. A recent analysis of U.S. Current Population Survey data by the Financial Times found that Gen Z men with a college degree had comparable unemployment rates to those of the same age who didn’t get a bachelor’s degree.

While no one can predict how these numbers will play out as the years pass, these facts point to the importance of thinking carefully about whether investing in a bachelor’s degree makes sense for your particular situation and aspirations.

Recommended: Undergraduate Student Loans

The Takeaway

If you’re wondering how much a bachelor’s degree costs, the answer is currently just over $150,000 on average. That’s a significant sum of money for most people, but a degree can lead to enhanced employment opportunities and lifetime earning power. Whether a student attends college as an in-state, out-of-state, or private university student can impact their total costs. Strategies to make a degree more affordable include financial aid, transferring from community college, and pursuing an online degree.

Some students may be interested in private student loans after federal loan options are exhausted, though these won’t offer the same protections as federal funding.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

FAQ

How much does the average bachelor’s degree cost in the U.S.?

As of early 2026, the average cost of a four-year bachelor’s degree is $153,080. However, this number can vary depending on whether you are an in-state or out-of-state student, and study at a public or private university. Your field of study can also impact the cost, due to specialized lab or material fees.

What is the cheapest way to earn a bachelor’s degree?

Some ways to economize on the cost of a bachelor’s degree include choosing your major with an eye on price, taking classes for credit at an affordable community college, and seeking financial aid.

Can financial aid cover the full cost of a bachelor’s degree?

While financial aid typically doesn’t cover the full cost of a bachelor’s degree, in some situations it can. To cover the entire expense of a degree, a student may need to combine grants, scholarships, state programs, and other funding sources.

How much student loan debt does the average bachelor’s graduate have?

Estimates say that the average graduate with a bachelor’s degree has taken out about $30,000 in loans in pursuit of their diploma.

Is it cheaper to get a bachelor’s degree online or in person?

It can often be cheaper to get a bachelor’s degree online. Estimates say you might save about $21,000 over four years. Just keep in mind that, like most things in life, online studies have pros and cons and may not be right for everyone.

Photo credit: iStock/Drazen Zigic

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

SoFi Bank, N.A. and its lending products are not endorsed by or directly affiliated with any college or university unless otherwise disclosed.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SOISL-Q126-017

SIMPLE IRA is a tax-advantaged retirement account that can help self-employed individuals and small business owners save and invest for the future.

You may already be familiar with traditional individual retirement accounts (IRAs). A SIMPLE IRA, or Saving Incentive Match Plan for Employees, is similar to a traditional IRA in that it’s also a tax-deferred account. But the contribution limits for SIMPLE IRAs are higher, and the tax treatment of these plans is slightly different.

Also, SIMPLE IRAs require employers to provide a matching contribution.

What Is a SIMPLE IRA?

SIMPLE IRA plans are employer-sponsored retirement accounts for businesses with 100 or fewer employees. They are also retirement accounts for the self-employed and sole proprietors. If you’re your own boss, and thus self-employed, you can set up a SIMPLE IRA for yourself.

For small business owners and the self-employed, SIMPLE IRAs are an easy-to-manage, low-cost way to contribute to their own retirement — while at the same time helping employees to contribute to their savings as well, both through tax-deferred, elective contributions, and a required employer match.

SIMPLE IRAs offer higher contribution limits than traditional IRAs (see below), but employers and employees still benefit from tax advantages like tax-deferred growth and contributions that are either deductible (for the employer) or reduce taxable income (for the employee).

How Does a SIMPLE IRA Work?

A SIMPLE IRA is one of many different types of retirement plans available, but it can be appealing for small business owners and those who are self-employed owing to the lower administrative burden.

That’s because, unlike a 401(k) plan (which requires a plan sponsor and a plan administrator, as well as a custodian for employee assets), a SIMPLE IRA basically enables the employer to set up IRA accounts at a financial institution for eligible employees — or allow employees to do so at the financial institution of their choice.

Once the plan is set up and contributions are made, the employee is fully vested (i.e., they have ownership of all SIMPLE IRA funds, per IRS rules), which is helpful when saving for retirement.

Employee Eligibility

In order for an employee to participate in a SIMPLE IRA, they must have earned at least $5,000 in compensation over the course of any two years prior to the current calendar year, and they must expect to make $5,000 in the current calendar year.

It’s possible for employers to set less restrictive rules for SIMPLE IRA eligibility. For example, they could lower the amount employees are required to have made in a previous two-year time. However, they cannot make participation rules more restrictive.

Employers can exclude certain types of employees from the plan, including union members who have already bargained for retirement benefits and nonresident aliens who don’t receive their compensation from the employer.

Employee Contribution Limits

Those who have a SIMPLE IRA can contribute up to $16,500 in 2025 (plus an extra $3,500 in catch-up contributions for those 50 and older). In 2026, they can contribute up to $17,000 (plus an extra $4,000 in catch-up contributions for those 50 and older). In both 2025 and 2026, those aged 60 to 63 can contribute $5,250 (instead of $3,500 and $4,000 respectively), thanks to SECURE 2.0.

Contributions reduce employees’ taxable income, which lowers their income taxes in the year they contribute. Contributions can be invested inside the account, and may grow tax-deferred until an employee makes withdrawals when they retire.

IRA withdrawal rules are particularly important to pay attention to as they can be a bit complicated. Withdrawals made after age 59 ½ are subject to income tax. If you make withdrawals before then, you may be subject to an additional 10%, with some exceptions, or 25% penalty (if you’ve had the account for less than two years).

Account holders must make required minimum distributions, or RMDs, from their accounts when they reach age 73 (as long as they turn 72 after December 31, 2022).

Matching Contributions

An employer is required to provide a matching contribution to employees in one of two ways. They can match up to 3% of employees’ compensation. Or they can make a non-elective contribution of 2% of employees’ compensation.

If an employee doesn’t participate in the SIMPLE IRA plan, they would still receive an employer contribution of 2% of their compensation, up to the annual compensation limit, which is $350,000 for 2025, and $360,000 for 2026.

This two-tiered structure allows employers to choose whatever matching structure suits them.

SIMPLE IRA vs Traditional IRA

When it comes to a SIMPLE IRA vs. a traditional IRA, the two plans are similar, but there are some key differences between the two. A SIMPLE IRA is for small business owners and their employees. A traditional IRA is for anyone with earned income.

To be eligible for a SIMPLE IRA, an employee generally must have earned at least $5,000 in compensation over the course of two years prior — and expect to make $5,000 in the current calendar year. With a traditional IRA, an individual must have earned income in the past year.

Contribution Limits

One of the biggest differences between the two plans is the contribution limit amount.

While individuals can contribute $7,000 in 2025 to a traditional IRA (or $8,000 if they are 50 or older), and $7,500 in 2026 (or $8,600 if they are 50 or older), those who have a SIMPLE IRA can contribute $16,500 in 2025, plus an extra $3,500 in catch-up contributions for those 50 and older, for a total of $20,000, and they can contribute $17,000 in 2026 plus an extra $4,000 in catch-up contributions, for a total of $21,000. Those aged 60 to 63 can contribute a catch-up of $5,250 for both 2025 and 2026 (instead of $3,500 and $4,000), for a total of $21,750 in 2025, and $22,250 in 2026.

Tax Treatment

And while both types of IRAs are considered tax deferred, SIMPLE IRAs use two different tax treatments.
For example: a traditional IRA generally allows individuals to make tax-deductible contributions. With a SIMPLE IRA, the employer or sole proprietor can make tax-deductible contributions to a SIMPLE IRA — while employees benefit from having their elective contributions withheld from their taxable income.

Both methods can help lower taxable income, potentially providing a tax benefit. But withdrawals are taxed as income, as they are with a traditional IRA.

Dive deeper: SIMPLE IRA vs Traditional IRA

SIMPLE IRA vs 401(k)

SIMPLE IRAs have some similarity to employer-sponsored 401(k) plans. Contributions made to both are made with pre-tax dollars, and the money in the accounts grows tax-deferred.

But while a 401(k) gives an employer the option of providing matching contributions to employees’ plans, a SIMPLE IRA requires matching contributions by the employer, as noted above.

Another major difference between the two plans is that individuals can contribute much more to a 401(k) than they can to a SIMPLE IRA.

•   In 2025, they can contribute $23,500 to their 401(k) and an additional $7,500 if they’re 50 or older. Those aged 60 to 63 can contribute $11,250 instead of $7,500 to their 401(k), thanks to SECURE 2.0. In 2026, they can contribute $24,500 and an additional $8,000 if they are 50 or older. Those aged 60 to 63 can again contribute $11,250 instead of $8,000.

Under a new law that went into effect on January 1, 2026 (as part of SECURE 2.0), individuals aged 50 and older who earned more than $150,000 in FICA wages in 2025 are required to put their 401(k) catch-up contributions into a Roth 401(k) account. With Roth accounts, individuals pay taxes on contributions upfront, but can make qualified withdrawals tax-free in retirement.

•   In comparison, individuals can contribute $16,500 to a SIMPLE IRA in 2025, plus an additional $3,500 if they are 50 or older, and in 2026, they can contribute $17,000, plus an additional $4,000 if they are 50 or older. Those aged 60 to 63 can contribute $5,250 (instead of $3,500 and $4,000) in 2025 and 2026, thanks to SECURE 2.0.

How to Run a SIMPLE IRA Plan

SIMPLE IRAs are relatively easy to put in place, since they have no filing requirements for employers. Employers cannot offer another retirement plan in addition to offering a SIMPLE IRA.

If you’re interested in setting up a SIMPLE IRA, banks and brokerages may have a plan, known as a prototype plan, that’s already been approved by the IRS.

Otherwise you’ll need to fill out one of two forms to set up your plan:

•   Form 5304-SIMPLE allows employees to choose the financial institutions that will receive their SIMPLE IRA contributions.

•   You can also fill out Form 5305-SIMPLE, which means employees will deposit SIMPLE IRA contributions at a single financial institution chosen by the employer.

Once you have established the SIMPLE IRA, an account must be set up by or for each employee, and employers and employees can start to make contributions.

Notice Requirements for Employees

There are minimal paperwork requirements for a SIMPLE IRA. Once the employer opens and establishes the plan through a financial institution, they need to notify employees about it. This should be done by October 1 of the year the plan is intended to begin. Employees have 60 days to make their elections.

Eligible employees need to be notified about the plan annually. Any changes or new terms to the plan must be disclosed. At the beginning of each annual election period, employers must notify their employees of the following:

•   Opportunities to make or change salary reductions.

•   The ability to choose a financial institution to receive SIMPLE IRA contribution, if applicable.

•   Employer’s decisions to make nonelective or matching contributions.

•   A summary description provided by the financial institution that acts as trustee of SIMPLE IRA fund, and notice that employees can transfer their balance without cost of penalty if the employer is using a designated financial institution.

Participant Loans and Withdrawals

Participants cannot take loans from a SIMPLE IRA. Withdrawals made before age 59 ½ are typically subject to a 10% penalty, or 25% if the account is less than two years old, in addition to any income tax due on the withdrawal amount.

Rollovers and Transfers to Other Retirement Accounts

For the first two years of participating in a SIMPLE IRA, participants can only do a tax-free rollover to another SIMPLE IRA. After two years, they may be able to roll over their SIMPLE IRA to a traditional IRA or an employer-sponsored plan such as 401(k).

A rollover to a Roth IRA would require paying taxes on any untaxed contributions and earnings in the accounts.

The Advantages and Drawbacks of a SIMPLE IRA Plan

While SIMPLE IRAs may offer a lot of benefits, including immediate tax benefits, tax-deferred growth, and employer contributions, there are some drawbacks. For example, SIMPLE IRAs don’t allow employees to save as much as other retirement plans such as 401(k)s and Simplified Employee Pension (SEP) IRAs.

In 2025, employees can contribute up to $23,500 to a 401(k), plus an additional $7,500 for those 50 and over. Those aged 60 to 63 can contribute $11,250 instead of $7,500 to their 401(k), thanks to SECURE 2.0.

In 2026, they can contribute $24,500 to a 401(k), plus an additional $8,000 for those 50 or older. Those aged 60 to 63 can contribute $11,250 instead of $8,000 to their 401(k), thanks to SECURE 2.0.

Individuals with a SEP IRA account can contribute up to 25% of their employee compensation, or $70,000, whichever is less, in 2025, and up to 25% of their employee compensation, or $72,000, whichever is less, in 2026.

The good news is, employees with SIMPLE IRAs can make up some of that lost ground. Employers may be wondering about the merits of choosing between a SIMPLE and traditional IRA, but they can actually have both.

Employers and employees can open a traditional or Roth IRA and fund it simultaneously with a SIMPLE IRA. For 2025, total IRA contributions can be up to $7,000, or $8,000 for those 50 and over. In 2026, total IRA contributions can be up to $7,500, or $8,600 for those 50 or older.

Here some pros and cons of starting and funding a SIMPLE IRA at a glance:

Eligibility and Participation in a SIMPLE IRA

As mentioned previously, there are some rules about who can participate in a SIMPLE IRA. Here’s a quick recap.

Who Can Establish and Participate in a SIMPLE IRA?

Small business owners with fewer than 100 employees and self-employed individuals can set up and participate in a SIMPLE IRA, along with any eligible employees.

Employers can’t offer any other type of employer-sponsored plan if they set up a SIMPLE IRA.

Employees’ Eligibility and Participation Criteria

In order for an employee to be eligible to participate, they must have earned at least $5,000 in compensation over the course of any two years prior to the current calendar year, and they must expect to make $5,000 in the current calendar year.

Employees can choose less restrictive requirements if they choose. They may also exclude certain individuals from a SIMPLE IRA, such as those in unions who receive benefits through the union.

Investment Choices and Account Maintenance

Because the employer doesn’t have to set up investment options for the SIMPLE IRA, employees have the advantage of setting up a portfolio from the investments available at the financial institution that holds the SIMPLE IRA.

Investment Choices for a SIMPLE IRA

Typically, there may be more investment choices with a SIMPLE IRA than there with a 401(k) because the SIMPLE IRA account may be held at a financial institution with a wide array of options.

Investment choices can include stocks, bonds, mutual funds, exchange-traded funds (ETFs), target-date funds, and more.

Understanding SIMPLE IRA Distributions

There are particular rules for SIMPLE IRA distributions, as there are with all types of retirement accounts.

Withdrawal Rules and Tax Consequences

As discussed previously, withdrawals made before age 59 ½ are subject to income tax plus a potential 10% or 25% penalty, depending on how long the account has been open.

Withdrawals made after age 59 ½ are subject to income tax only and no penalty. Account holders must make required minimum distributions from their accounts when they reach age 73 (as long as they turn 72 after Dec. 31, 2022).

The 2-Year Rule and Early Withdrawal Penalties

There is a two-year rule for withdrawals from a SIMPLE IRA. If you make a withdrawal within the first two years of participating in the plan, the penalty may be increased from 10% to 25%, with some exceptions (e.g., for a first-time home purchase, for higher education expenses, and more). In addition, all withdrawals are subject to ordinary income tax.

The Takeaway

SIMPLE IRAs are one of the easiest ways that self-employed individuals and small business owners can help themselves and their employees save for retirement, whether they’re experienced retirement investors or they’re opening their first IRA.

These accounts can even be used in conjunction with certain other retirement accounts and investment accounts to help individuals save even more.

Prepare for your retirement with an individual retirement account (IRA). It’s easy to get started when you open a traditional or Roth IRA with SoFi. Whether you prefer a hands-on self-directed IRA through SoFi Securities or an automated robo IRA with SoFi Wealth, you can build a portfolio to help support your long-term goals while gaining access to tax-advantaged savings strategies.

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