72t calculator: your SEPP payment 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 the amount its schedule sets 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
Example figures: $600,000 in an IRA, first payment at 50, a 5% rate. Replace them with your own. Jump to the inputs.
Starting at 50, you are locked in until age 59½ — 9½ years and 10 payments. Change the schedule before then (one switch to the required minimum distribution method is allowed) and the 10% additional tax comes back on the payments already taken before 59½, with interest.
- Fixed annuitization, every year
- $37,827
- The balance divided by an annuity factor of 15.8615, from the IRS mortality rates. Also fixed.
- 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.
Fixed amortization through the lock, at 6% growth. Payment taken at the start of each year.
| 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 |
All three IRS methods are shown, over your life only: a series worked on the joint lives of you and a beneficiary is not modeled. Fixed annuitization uses the mortality rates Notice 2022-6 names (26 CFR 1.401(a)(9)-9(e)), with each payment at the end of a year, as in the IRS's own example. The link carries your figures after the #, so you can save or share it. Your figures are not sent to us.
Worked example: a 50-year-old starting a 72(t) series on $600,000 in an IRA, using a 5% rate, can take $36,187 a year by fixed amortization, $37,827 by fixed annuitization (an annuity factor of 15.8615), and $16,575 in the first year by the RMD method. The payments are locked in until age 59½: 10 payments. Change the balance, age or rate above to run your own SEPP calculation.
72t payments by the age you start
The same $600,000 IRA and 5% rate, started at four ages. Starting younger divides the balance over more years, so each 72t payment is smaller. The series has to run until the later of five years from the first payment or age 59½, as the last column shows. The payment moves in step with the balance: double the balance and each fixed payment doubles.
Yearly 72(t) payment on $600,000, by the age of the first payment. Example figures, not advice.
| First payment at | Fixed amortization | Fixed annuitization | RMD method, first year | Locked in until |
|---|---|---|---|---|
| 45 | $34,693 | $36,003 | $14,634 | 59½ |
| 50 | $36,187 | $37,827 | $16,575 | 59½ |
| 55 | $38,168 | $40,244 | $18,987 | 60 |
| 58 | $39,690 | $42,041 | $20,761 | 63 |
Before income tax. The shaded row is the worked example above. Put your own balance, age and rate in the calculator at the top for your 72t calculation.
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. It runs until the later of five years from the first payment or age 59½, and the schedule must not change (one switch to the required minimum distribution method is allowed): make any other change before then and the 10% additional tax comes back on the payments already taken before 59½, with interest. Start at 50 and that is nine and a half years; start at 57 and it is five.
Adding money to the account, moving part of it to another plan, or rolling over a payment (putting it into another retirement plan or IRA) also counts as changing the series.
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 test is age 50 or 25 years of service under the plan, whichever comes first. 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. A 72(t) series has to run until the later of five years from the first payment or age 59½. The schedule must not change (one switch to the required minimum distribution method is allowed): make any other change before then and the 10% additional tax comes back on the payments already taken before 59½, with interest. Adding money to the account, moving part of it to another plan, or rolling over a payment (putting it into another retirement plan or IRA) also counts as changing the series. 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. Fixed annuitization also stays the same; it divides the balance by an annuity factor worked from the IRS mortality rates, and across this calculator's ages and rates it gives the largest of the three ($37,827 in the worked example above, against $36,187). 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, is what the IRS calls a modification: the 10% additional tax comes back on the payments already taken before 59½, with interest. Adding money to the account, moving part of it to another plan, or rolling over a payment (putting it into another retirement plan or IRA) also counts as changing the series. So does taking out a larger or smaller amount than the schedule sets.
- 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 (age 50 or 25 years of service 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.
Sources: Internal Revenue Code §72(t)(2)(A)(iv) and (v) and §72(t)(4); IRS Notice 2022-6; Single Life Table and mortality rates, 26 CFR 1.401(a)(9)-9(b) and (e); IRS, Substantially equal periodic payments, Q&A 7 and 9.