72(t) SEPP Calculator

A 72(t) SEPP (Substantially Equal Periodic Payments) is an IRS-sanctioned way under IRC §72(t) to take withdrawals from an IRA or 401(k) before age 59½ without the 10% early withdrawal penalty. You commit to a fixed schedule of substantially equal annual payments calculated under one of three IRS-approved methods.

The IRS allows three methods: the RMD method (account balance divided by a life-expectancy factor, recalculated each year), the fixed amortization method (an annuity-style payment using the 120% mid-term AFR, fixed for the life of the SEPP), and the fixed annuitization method (a fixed payment derived from a mortality table and interest rate). The amortization method is the most common; the RMD method produces the lowest payment but fluctuates with your balance.

Once you start a 72(t) SEPP, payments must continue for at least 5 years or until you reach age 59½, whichever period is longer. For someone starting at age 50, that means continuing until age 59½; for someone starting at 57, that means continuing for a full 5 years past 59½.

If you change the payment amount or stop the SEPP before the required period ends, the modification triggers a retroactive 10% penalty plus interest on all prior distributions you took under the plan. This is why the schedule must be followed precisely once it begins.

Under IRS Notice 2022-6, the fixed amortization and fixed annuitization methods can use any interest rate up to the greater of 5% or 120% of the federal mid-term Applicable Federal Rate (AFR) — for either of the two months immediately before your SEPP begins. The 5% floor means you can always use at least 5% even when the published 120% mid-term AFR is lower. The 120% mid-term AFR itself is published monthly by the IRS, so check the rate for your specific starting month before locking in a rate.

At current interest rates the fixed amortization method usually produces the highest annual payment, while the RMD method produces the lowest. The RMD method is recalculated each year and moves with your account balance, whereas the amortization and annuitization methods lock in a fixed payment at the start. This calculator compares all three side by side.