72(t) SEPP Calculator
Calculate substantially equal periodic payments to access your IRA before 59½ without the 10% early withdrawal penalty.
Now with 5% interest floor from IRS Notice 2022-6 — withdraw up to 40% more than outdated calculators show
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72(t) SEPP Calculator
Substantially Equal Periodic Payments
Current max: 5.00% (Feb 2026 — 5% floor applies per Notice 2022-6, 120% AFR is 4.63%)
Factor: 36.2 years. Most early retirees use Single Life for maximum income.
SEPP Commitment: 9.5 years
Must continue until age 59.5 (5 years or 59½, whichever is later). Modifying payments triggers 10% penalty + interest on ALL prior withdrawals.
Choose Your Method
Annual
$13,812
Monthly
$1,151
Rate
2.8%
Recalculated annually. Payment may decrease if balance drops.
Annual
$29,914
Monthly
$2,493
Rate
6.0%
Fixed payment for entire SEPP period. Most flexible option.
Annual
$30,156
Monthly
$2,513
Rate
6.0%
Fixed payment based on annuity factor. Highest withdrawals but depletes account faster.
Account Balance Projection
How your balance changes under each method assuming 5% annual growth
Important Considerations
- • You can switch from Amortization/Annuitization to RMD once (one-time)
- • Using: Single Life (Table I) — factor 36.2 years at age 50
- • Tables updated per Notice 2022-6 (effective Jan 1, 2023)
- • You still owe income tax on all withdrawals
- • Consult a tax professional before starting a SEPP plan
What is 72(t) / SEPP?
72(t) refers to section 72(t)(2)(A)(iv) of the Internal Revenue Code, which allows penalty-free early withdrawals from IRAs and 401(k)s through a program called Substantially Equal Periodic Payments (SEPP).
Normally, withdrawing from retirement accounts before age 59½ triggers a 10% penalty. SEPP allows you to avoid this penalty by committing to a fixed withdrawal schedule for at least 5 years or until you reach 59½, whichever is longer.
Penalty-Free
Access your IRA before 59½ without the 10% early withdrawal penalty.
Three Methods
Choose RMD, Amortization, or Annuitization based on your income needs.
Commitment Required
Must maintain payments for 5 years or until 59½, whichever is longer.
2026 Interest Rate Update: The 5% Floor
Based on IRS Notice 2022-6 — Read Official IRS Guidance
IRS Notice 2022-6 was a game-changer for early retirees. Before 2022, when the Federal Mid-Term Rate dropped below 1%, your 72(t) payments were severely limited. The new rule establishes a 5% floor—you can now use the greater of:
- 5% (the new floor), OR
- 120% of the Federal Mid-Term Rate (approximately 4.8% as of January 2026)
This means you can withdraw up to 40% more than calculators using the old rules would show. Many online calculators haven't updated—make sure you're using current rates.
Example: Impact of the 5% Floor
Old Rules (1.5% rate)
$24,000/year
From $500k balance at age 50
Notice 2022-6 (5% floor)
$34,000/year
Same balance, 42% more income
The Three Calculation Methods
Required Minimum Distribution (RMD)
Divides your account balance by your life expectancy factor. Produces the lowest payments.
Pros:
- Lowest withdrawal rate - preserves more savings
- Can switch to this from other methods (one-time)
Cons:
- Payments recalculated annually - amount varies
- May not provide enough income
Best for: Best if you want minimum withdrawals and can handle variable income.
Fixed Amortization
Amortizes your balance over life expectancy using a reasonable interest rate. Most popular method.
Pros:
- Fixed payment amount - predictable income
- Higher than RMD, lower than Annuitization
- Can switch to RMD later if needed
Cons:
- Locked into payment amount
- Interest rate affects payment significantly
Best for: Best for most people - balances income needs with account preservation.
Fixed Annuitization
Uses an annuity factor based on IRS mortality tables. Produces the highest payments.
Pros:
- Highest payment amount
- Fixed and predictable
- Can switch to RMD later if needed
Cons:
- Depletes account fastest
- May not be sustainable long-term
Best for: Best if you need maximum income and have other retirement savings.
72(t) vs Rule of 55
| Feature | 72(t) SEPP | Rule of 55 |
|---|---|---|
| Minimum Age | Any age | 55+ |
| Eligible Accounts | Any IRA or 401(k) | Current employer 401(k) only |
| Flexibility | Low - fixed payments required | High - any amount |
| Duration | 5 years or until 59½ | No minimum |
| Best For | IRA access, under 55 | 401(k) access at 55+ |
Advanced: The Account Splitting Strategy
A sophisticated technique most advisors don't mention
Most 72(t) content treats your IRA as one monolithic account. But savvy early retirees split their IRA before starting SEPP to optimize their withdrawals and protect against emergencies.
How It Works
Identify your income need
Example: You need $40,000/year to cover expenses until Social Security kicks in.
Split your IRA before starting SEPP
From your $1M IRA, create a $600k "SEPP IRA" and a $400k "Reserve IRA" (tax-free IRA-to-IRA transfer).
Run 72(t) only on the SEPP IRA
The $600k IRA generates ~$40k/year in penalty-free income. The Reserve IRA remains untouched.
Use Reserve for emergencies
If an emergency hits, tap the Reserve IRA. You'll pay the 10% penalty on that withdrawal—but you don't bust your main SEPP.
Why This Matters
If you run SEPP on your entire $1M and need an emergency withdrawal, you "bust" the entire plan—triggering retroactive penalties on ALL prior distributions. With splitting, you protect the core SEPP while maintaining emergency access.
Critical Warnings
Don't Bust Your SEPP
Modifying or stopping payments before the required period ends triggers the 10% penalty RETROACTIVELY on ALL previous distributions, plus interest. This can be financially devastating.
You Still Owe Taxes
SEPP only avoids the 10% penalty. You still owe regular income tax on all traditional IRA/401(k) withdrawals. Plan for taxes in your budget.
Consult a Professional
SEPP rules are complex and mistakes are costly. Work with a tax professional or financial advisor before starting a 72(t) distribution plan.
Frequently Asked Questions
What is a 72(t) distribution?
A 72(t) distribution (also called SEPP - Substantially Equal Periodic Payments) allows you to withdraw from your IRA before age 59½ without the 10% early withdrawal penalty. Per IRC Section 72(t)(2)(A)(iv), you must take substantially equal payments for at least 5 years or until you reach 59½, whichever is longer.
What interest rate should I use for 72(t) in 2026?
In 2026, use the greater of 5% OR 120% of the Federal Mid-Term Rate. IRS Notice 2022-6 established a 5% floor—a game-changer that lets you withdraw up to 40% more than pre-2022 calculators showed. As of February 2026, 120% of the mid-term rate is 4.63% annual, so the 5% floor applies. Our calculator defaults to 5%. Always verify current rates at the IRS Applicable Federal Rates page before starting your SEPP.
Does 72(t) apply to 401(k) plans?
Yes, 72(t) SEPP applies to 401(k) plans, but only if you have separated from service with that employer. You cannot start SEPP on a 401(k) while still employed there. Many early retirees roll their 401(k) into an IRA first, which has no separation requirement. Note: The Rule of 55 may be simpler for 401(k) access if you're 55+ when leaving your job.
What are the three 72(t) calculation methods?
The IRS allows three methods per Revenue Ruling 2002-62: (1) RMD Method - divides balance by life expectancy factor, produces lowest variable payments; (2) Fixed Amortization - amortizes balance over life expectancy at up to 5% interest (per Notice 2022-6), produces fixed payments—most popular for FIRE; (3) Fixed Annuitization - uses annuity factor from IRS tables, typically produces highest fixed payments.
How long must I continue SEPP payments?
You must continue SEPP for the LONGER of 5 years OR until age 59½. Examples: Start at age 45 → continue until 59½ (14.5 years). Start at age 50 → continue until 59½ (9.5 years). Start at age 57 → continue 5 full years until age 62. Stopping or modifying payments before this triggers the 10% penalty retroactively on ALL prior distributions plus interest.
Can I stop 72(t) payments if I get a job?
No. Getting a new job does NOT allow you to stop SEPP payments early. You must continue your scheduled payments regardless of employment changes. The only ways to stop early without penalty are death, disability, or the one-time switch to the RMD method (which only reduces payments, doesn't stop them). Stopping for any other reason triggers the recapture tax on ALL prior distributions.
Can I change my 72(t) payment amount?
Very limited options. The IRS allows exactly ONE change: switching from Fixed Amortization or Annuitization to the RMD method. This reduces payments but preserves your account. You cannot switch to a higher-payment method or adjust amounts arbitrarily. Any other modification "busts" your SEPP and triggers the 10% penalty retroactively.
72(t) vs Rule of 55 - which is better?
Rule of 55 is better if you qualify—it's simpler and more flexible, letting you withdraw any amount. But it only works for 401(k)s from the employer you're leaving at age 55+. Use 72(t) if: (1) you're under 55, (2) your money is in IRAs, or (3) you left previous employers before 55. 72(t) works at any age with any IRA or 401(k), but locks you into fixed payments.
What is the 72(t) account splitting strategy?
A smart strategy: split your IRA before starting SEPP. Example: You have $1M but only need $40k/year. If you run 72(t) on the full $1M, you might be forced to withdraw $60k (taxable). Instead, split into a $600k "SEPP IRA" and $400k "Reserve IRA." Run 72(t) only on the $600k to get ~$40k. If emergencies hit, tap the Reserve—you pay 10% penalty on that withdrawal, but you don't bust the main SEPP.
What happens if I bust my SEPP?
Catastrophic consequences. The IRS applies the 10% penalty RETROACTIVELY to every distribution you've taken, plus interest. Example: You took $40k/year for 7 years ($280k total), then accidentally modified payments. You now owe $28,000+ in penalties plus years of compounded interest. Even a $0.01 calculation error can trigger this. Document everything and consider professional help.
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Not financial advice. This calculator is for educational purposes only and does not constitute financial, tax, or investment advice. Results are estimates based on the inputs you provide and historical data. Consult a qualified financial advisor for personalized guidance. Read our editorial guidelines.