72(t) SEPP Calculator

This 72(t) calculator compares two of the three IRS-approved methods for taking Substantially Equal Periodic Payments (SEPP) from an IRA before age 59½ without triggering the 10% early withdrawal penalty.

Worked example (the defaults): a $500,000 IRA, age 50, using a 5% interest rate and the Single Life Table divisor of 36.2. The RMD method — recalculated every year based on that year's balance — produces $13,812 for the first year. The Fixed Amortization method — a level payment locked in for the whole period — produces $30,156 every year regardless of how the account performs. At age 50, the SEPP period must run at least 9.5 years (until age 59½), since the rule requires the longer of 5 years or reaching 59½.

The gap between these two numbers is the central trade-off: RMD gives you flexibility (it adjusts if your balance drops) but the lowest payment; Fixed Amortization gives you a much higher, predictable payment but locks you in regardless of what the market does. Rule 72(t) is one path to early retirement income — if you're planning the withdrawal side of retirement more broadly, the Safe Withdrawal Rate Calculator covers standard post-59½ drawdown planning.

Per Rev. Rul. 2002-62 and Notice 2022-6, the IRS permits three calculation methods. This calculator models two of them precisely:

The third IRS method, Fixed Annuitization, uses a mortality-table annuity factor from a different table (Rev. Rul. 2002-62 Appendix B) rather than either life expectancy table above. It typically lands close to the Fixed Amortization result, but because it depends on a distinct actuarial factor, this calculator doesn't approximate it — showing the two methods that can be calculated precisely from published data is more accurate than guessing at the third.

72(t)/SEPP plans are unforgiving. Once started, payments must continue unmodified for the longer of 5 years or until you reach age 59½ — whichever ends later. Any change outside of one narrow exception "busts" the plan: the IRS retroactively applies the 10% penalty to every distribution you've already taken, plus interest, back to when you started. The one exception, added by SECURE 2.0, is a single one-time switch from Fixed Amortization or Fixed Annuitization to the RMD method, which lowers your payment going forward but doesn't bust the plan.

A common strategy to limit this risk: split your IRA before starting, moving only the amount you actually need into a separate account, then run 72(t) on that smaller account while leaving the rest untouched and flexible.

A 72(t) SEPP (substantially equal periodic payment) is an IRS-approved method to withdraw money from an IRA before age 59½ without the 10% early withdrawal penalty. This 72(t) calculator compares the two most commonly used IRS methods — the RMD method (lower, variable annual payments) and the Fixed Amortization method (higher, locked annual payments) — so you can choose which gives you the income you need while meeting the strict IRS rules.

Worked example: Age 52, $600,000 IRA, 5% interest rate, Single Life Table.

• RMD method: $600,000 ÷ 34.3 (Single Life factor at 52) = $17,493/year. Recalculated every year.
• Fixed Amortization method: Locked at $36,927/year for the entire SEPP period — regardless of how the account performs.
• Minimum SEPP duration: 7.5 years (the longer of 5 years or until age 59½).

The key compliance risk is modification. Under 72(t) rules (Rev. Rul. 2002-62), you must take the same payment for the entire SEPP period — modifying the amount (other than a one-time switch from Fixed Amortization to the RMD method) retroactively applies the 10% penalty to all previous distributions, plus interest. That's a potentially large unexpected tax bill. The SEPP period is the longer of 5 years or until you reach age 59½.

The interest rate you use also matters. The IRS allows up to 120% of the federal mid-term AFR for either of the two months preceding your first SEPP payment, with a floor of 5% (IRS Notice 2022-6). A higher rate produces a larger payment under the Fixed Amortization method — useful if you need more income, but it also commits you to that higher payment for the full period.

72(t) SEPPs are typically used when someone retires in their early-to-mid 50s and needs to bridge the gap before they can access a 401(k) (at 59½ or earlier under the Rule of 55), Social Security (at 62), or pension income. They're not a first resort — consider whether a taxable brokerage account, Roth contributions (which can be withdrawn at any time penalty-free), or a 401(k) Rule of 55 provides more flexibility before committing to a rigid SEPP schedule.

The interest rate you use in a 72(t) Fixed Amortization or Fixed Annuitization calculation directly determines your annual payment — a higher rate means a larger distribution. The IRS sets a cap in Notice 2022-6: the maximum allowable rate is the greater of (a) 5% or (b) 120% of the federal mid-term Applicable Federal Rate (AFR) for either of the two months immediately before the month your distributions begin.

Notice 2022-6 added the 5% floor specifically because low-rate environments (like 2020–2021) were producing very small 72(t) payments under the old formula. The floor ensures the method remains viable as an early-retirement income tool regardless of how low interest rates fall. When rates are above 4.17% mid-term (120% of 4.17% = 5%), the AFR-based ceiling takes over and rises with rates — which is why 72(t) plans started in higher-rate years lock in larger fixed payments forever.

Strategy note on timing: because the payment is locked in at the rate you choose on day one, starting a Fixed Amortization SEPP when rates are relatively high produces permanently larger distributions. You pick the rate at inception; it doesn't float with market rates afterward. If rates fall substantially, you have one IRS-permitted option: switch to the lower-payment RMD method (which recalculates annually). You cannot switch in the other direction.

The IRS recognizes three methods for calculating SEPP distributions. Here's how they compare for a $500,000 IRA, age 50, using a 5% interest rate and the Single Life factor of 36.2:

*Fixed Annuitization uses a mortality-table annuity factor from Rev. Rul. 2002-62 Appendix B, producing a result close to but not identical to the amortization method. This calculator models the RMD and Fixed Amortization methods, which can be computed precisely from published IRS tables. The annuitization approximation would be misleading without the exact actuarial factor, which varies by the chosen interest rate and mortality table version.

Per Revenue Ruling 2002-62, you may switch from Fixed Amortization or Fixed Annuitization to the RMD method once (one-time, one-direction only). Switching cuts your payment — which can be valuable if your balance drops significantly — without triggering the retroactive 10% penalty that would apply to any other modification. You cannot switch back, and you cannot switch from the RMD method to either fixed method.