72(t) SEPP calculator
Work out the penalty-free payment you can take from an IRA before 59 1/2 under each of the three IRS methods, and how long the series must run.
Your series
Use the balance of the IRA you will run the payments from.
Up to the greater of 5% and 120% of the federal mid-term rate
Compare the three methods
Same balance, age and interest rate. Pick the one that matches what you need to live on.
| Method | Per year | Per month | Changes? |
|---|---|---|---|
| Fixed amortizationSelected | $24,618 | $2,052 | Fixed |
| Fixed annuitization | $25,835 | $2,153 | Fixed |
| Required minimum distribution | $11,662 | $972 | Yearly |
The annuitization figure uses mortality implied by the IRS Single Life Table rather than the Notice 2022-6 annuity table itself, so expect the official figure to differ by a few percent.
Year by year
Payments come out at the start of each year, then the rest grows at your expected return.
| Year | Start | Payment | Year end |
|---|---|---|---|
| 2026 (52) | $400,000 | $24,618 | $394,151 |
| 2027 (53) | $394,151 | $24,618 | $388,010 |
| 2028 (54) | $388,010 | $24,618 | $381,561 |
| 2029 (55) | $381,561 | $24,618 | $374,790 |
| 2030 (56) | $374,790 | $24,618 | $367,681 |
| 2031 (57) | $367,681 | $24,618 | $360,216 |
| 2032 (58) | $360,216 | $24,618 | $352,378 |
| 2033 (59) | $352,378 | $24,618 | $344,147 |
Warren provides educational information, not individualized financial, tax or legal advice. Read our disclaimers.
Running a 72(t) series safely
Carve out the account
Roll the amount you need into a separate IRA and run the SEPP on that account only. The payment is based on its balance and your other accounts stay flexible.
Payments are taxable income
There is no penalty, but every payment is ordinary income. Keep the payment within a comfortable bracket and set aside tax or ask for withholding.
Calendar years count
You may take the full annual amount in your first year even if you start in December, or prorate it by month. Later years must take the full amount by December 31.
Document everything
Keep the calculation, the interest rate source and the life expectancy table you used. The IRS can ask how the payment was set years later.
Frequently asked questions
- What is a 72(t) SEPP?
- Section 72(t) of the tax code lets you take money out of an IRA or old 401(k) before age 59 1/2 without the 10% early withdrawal penalty, as long as you take a series of substantially equal periodic payments. The payment is set by one of three IRS methods and must continue for five years or until you reach 59 1/2, whichever is later. Ordinary income tax still applies.
- How do the three methods differ?
- The amortization method spreads the balance over your life expectancy at the chosen interest rate, like a loan. The annuitization method divides the balance by an annuity factor built from IRS mortality rates and the same interest rate. Both give a fixed payment every year. The RMD method divides the balance by your life expectancy factor each year, so the payment changes with the balance and is usually much smaller.
- What interest rate can I use?
- IRS Notice 2022-6 lets you use any rate up to the greater of 5% and 120% of the federal mid-term rate for either of the two months before your first payment. A higher rate gives a bigger payment. Most people use the maximum, which has been 5% or a little above since 2022.
- What happens if I change or stop the payments?
- Modifying the series before it ends, by taking more or less or adding money to the account, triggers the 10% penalty on every distribution taken so far plus interest. The one allowed change is a single switch from the amortization or annuitization method to the RMD method. Splitting your IRA first and running the SEPP on one piece keeps the rest available for emergencies.
- Is a 72(t) plan a good idea?
- It fits people who retire early with most of their savings in pre-tax accounts and need a bridge to 59 1/2. The rigidity is the downside: once started you cannot adjust for a bad market or a change in plans. Alternatives include the Rule of 55 for a 401(k) left at an employer you separated from at 55 or later, Roth contribution basis, and taxable savings.
Build an early retirement income plan around your accounts
Warren AI maps which accounts to draw from before and after 59 1/2 so a 72(t) series, Roth basis and taxable savings work together.