72(t) calculator: your IRA before 59½
Retiring early with the money in an IRA? A 72(t) series lets you draw it before 59½ without the 10% penalty — if you take a fixed amount and keep taking it. Here's how much, and for how long.
Fixed amortization lets you take, every year,
$36,187
about $3,016 a month, before income tax
Starting at 50, you are locked in until age 59½ — 9½ years and 10 payments. Change the amount before then and the 10% comes back on every payment so far, plus interest.
- RMD method, first year
- $16,575
- Recalculated each year from the balance, so it moves with the market.
- IRA needed for $40,000 a year
- $663,215
- A series runs on one IRA. You can split an IRA first so the series uses only what you need.
| Age | IRA, start of year | Payment |
|---|---|---|
| 50 | $600,000 | $36,187 |
| 51 | $597,641 | $36,187 |
| 52 | $595,141 | $36,187 |
| 53 | $592,491 | $36,187 |
| 54 | $589,682 | $36,187 |
| 55 | $586,704 | $36,187 |
| 56 | $583,548 | $36,187 |
| 57 | $580,202 | $36,187 |
| 58 | $576,656 | $36,187 |
| 59 | $572,897 | $36,187 |
| 60 | $568,912 | Free to change |
Two of the three IRS methods are shown. The third, fixed annuitization, needs the mortality table in Notice 2022-6 and is not modelled here. Nothing is stored and nothing is sent to us — the address bar carries your figures so you can save or share them.
What you are signing up for
The payment is set by your balance, your age and an interest rate, not by what you want to spend. Once it starts, it runs until the later of five years or 59½. Start at 50 and that is nine and a half years; start at 57 and it is five. The earlier you start, the longer the lock.
The series is tied to one IRA. That is what makes it workable: split the IRA first, point the series at the part that produces the income you need, and leave the rest untouched as a reserve for the years the fixed payment is not enough.
Check the Rule of 55 first
If you leave your job in or after the year you turn 55, the 401(k) or 403(b) from that job can pay you without the 10%, with no schedule to keep. For qualified public safety workers the age is 50. It is usually the simpler route.
Two catches. It covers only the plan at the employer you left, not IRAs or plans from earlier jobs. And rolling that plan into an IRA ends it, so a rollover done out of habit can cost you the exception. 72(t) is the route when the money is already in an IRA, or when you stop work before 55. The Rule of 55 calculator checks whether you qualify.
Questions people ask
- What are substantially equal periodic payments?
- A series of substantially equal periodic payments from an IRA. Section 72(t) of the tax code waives the 10% additional tax on withdrawals before 59½ if you take the payments on a schedule the IRS accepts and keep taking them until the later of five years after the first payment or age 59½. Ordinary income tax still applies.
- Which method should I use?
- IRS Notice 2022-6 allows three: required minimum distribution, fixed amortization and fixed annuitization. The RMD method gives the smallest payment and changes every year. Fixed amortization gives a larger payment that stays the same. You may switch once from a fixed method to the RMD method without breaking the series, so starting fixed keeps that door open.
- What interest rate can I use?
- Any rate up to the greater of 5% or 120% of the federal mid-term rate for either of the two months before your first payment. A higher rate gives a higher payment. The IRS publishes the mid-term rate each month in its applicable federal rates ruling.
- What happens if I change the payments?
- Changing the series before it ends, other than the one-time switch to the RMD method, counts as a modification. The 10% additional tax then applies to every payment taken under the series so far, plus interest. Adding money to that IRA or taking extra out also counts.
- Is the Rule of 55 better?
- Often, if it applies to you. If you leave your job in or after the year you turn 55 (50 for some public safety workers), withdrawals from that employer's 401(k) or 403(b) avoid the 10% with no fixed schedule. It does not cover IRAs, and it is lost if you roll that plan into an IRA first. 72(t) is the route when the money is already in an IRA or you stop work before 55.
The other main route to money before 59½ is a Roth conversion ladder; to see which route fits your accounts, use the withdrawal strategy chooser. To see when you reach the number at all, use the FIRE calculator; for cover before Medicare, see health insurance in early retirement.
Sources: Internal Revenue Code §72(t)(2)(A)(iv) and (v) and §72(t)(4); IRS Notice 2022-6; Single Life Table, 26 CFR 1.401(a)(9)-9(b).