72(t) SEPP Calculator — Substantially Equal Periodic Payments

Rule 72(t) of the Internal Revenue Code lets you withdraw money from an IRA or qualified retirement plan before age 59½ without triggering the usual 10% early-withdrawal penalty — as long as you commit to a series of "substantially equal periodic payments" (SEPP) that follow one of three IRS-approved calculation methods. Once you start, you generally must continue the same payment schedule for at least five years or until you turn 59½, whichever is later. Stopping early or changing the amount is treated as a "modification" and retroactively triggers the penalty (plus interest) on every payment already taken.

This calculator computes your annual distribution under all three methods defined in IRS Notice 2022-6, side by side, from one shared account balance, age, and interest rate:

Required Minimum Distribution (RMD) method: divides your account balance by the IRS Single Life Expectancy factor for your attained age (26 CFR §1.401(a)(9)-9, Table I). Because both the balance and the life-expectancy factor are recalculated every year, this method produces a different payment amount each year — generally the lowest of the three, and the only one that automatically adjusts for market performance.

Fixed Amortization method: amortizes your account balance over your single life expectancy at a chosen interest rate, similar to a mortgage payment calculation. The resulting annual payment is calculated once and stays fixed for the life of the SEPP schedule, regardless of how the account balance performs afterward.

Fixed Annuitization method: divides your account balance by an annuity factor derived from the mortality table in 26 CFR §1.401(a)(9)-9(e), Table 4, using the chosen interest rate. This calculator reproduces that mortality table and annuity-factor formula exactly — it is not an approximation. The payment is calculated once and stays fixed, similar to the amortization method, though the two produce slightly different amounts because they use different underlying tables and formulas.

The interest rate you may use for the amortization and annuitization methods is capped by IRS Notice 2022-6 §3.02(c) at the greater of 5% or 120% of the federal mid-term rate published monthly by the IRS. Because the 120%-of-mid-term-rate figure changes monthly and this calculator does not fetch live rate data, the input here is bounded to the 5% safe-harbor ceiling that is always available regardless of the current mid-term rate. If the current 120% mid-term rate exceeds 5%, a higher rate may be permitted — check the current IRS Applicable Federal Rates table or consult a tax professional before finalizing your SEPP election.

SEPP elections are irrevocable in practice: once you choose a method and a starting payment, you are locked in for the required duration. A one-time switch from the amortization or annuitization method to the RMD method is permitted without penalty (a change made available by Notice 2022-6), but no other modifications are allowed. Because the financial and tax consequences of an improper SEPP schedule can be severe — retroactive 10% penalties on years of withdrawals, plus interest — this calculator is an educational planning tool, not a substitute for review by a qualified tax professional before you begin.