SEPP 72(t) Calculator
Section 72(t) lets IRA owners under 59½ withdraw penalty-free if they take Substantially Equal Periodic Payments (SEPP) for 5 years OR until age 59½, whichever is longer. Three IRS-approved calculation methods produce different annual amounts.
How SEPP 72(t) Works
IRS Code §72(t)(2)(A)(iv) waives 10% early-withdrawal penalty if you take Substantially Equal Periodic Payments (SEPP) annually for 5 years OR until age 59½ — whichever is LONGER. A 50-year-old must continue 9.5 years. A 56-year-old must continue 5 years (because that exceeds the 3.5 years to 59½).
The Three Approved Methods
RMD Method: balance / life expectancy factor (recalculated annually — smallest payment, fluctuates). Fixed Amortization: amortize balance over life expectancy using AFR (level payments). Fixed Annuitization: balance / annuity factor using mortality table + AFR (level payments). Amortization and annuitization produce similar but slightly different amounts.
Modifying SEPP Triggers Retroactive Penalty
Once SEPP begins, modifying — taking more or less than calculated — triggers 10% penalty on EVERY prior distribution plus interest. Common mistakes: missing a payment, taking extra, switching methods (one-time switch from amortization/annuitization to RMD is allowed). Plan carefully or use a financial planner experienced with 72(t).
SEPP 72(t) Worked Example: $500,000 IRA at Age 50 (2026)
Concrete numbers make the tradeoffs clear. Assume a $500,000 traditional IRA, account owner age 50, 5.0% Applicable Federal Rate (120% mid-term AFR — check the current month at IRS Applicable Federal Rates). Using the single-life expectancy factor of 34.2 per IRS Publication 590-B (2026 tables):
- RMD Method: $500,000 / 34.2 = ~$14,620/year — recalculates annually as balance changes
- Fixed Amortization: ~$28,800/year — level payments for the full plan
- Fixed Annuitization: ~$29,100/year — level payments, mortality-based
Plan must run 9.5 years (until age 59½, which exceeds the 5-year minimum). Total withdrawn under fixed amortization: ~$273,600 over 9.5 years. Miss a payment or take extra during that window and the IRS retroactively assesses 10% penalty on every prior withdrawal plus interest — roughly $27,000+ back-penalty on this example. The one legal escape is the "one-time switch" (Rev. Rul. 2002-62): you may switch from amortization or annuitization to the RMD method exactly once. Consider the switch when markets crash and the fixed method would exhaust the IRA prematurely.
Source: IRS Code §72(t), Revenue Ruling 2002-62 (SEPP Methods), IRS Publication 590-B. Last updated 2026-07-03.