72(t) SEPP withdrawal calculator

72(t) — early IRA access without the 10% penalty

Substantially Equal Periodic Payments (SEPP) under IRC 72(t)(2)(A)(iv) let you withdraw from an IRA before age 59½ without the 10% early-withdrawal penalty. The catch: you must commit to substantially equal payments for 5 years OR until you turn 59½, whichever is LATER.

The three computation methods

1. Amortization (most common, used here) — calculates a fixed annual payment based on your life expectancy + interest rate
2. Annuitization — uses an annuity factor; similar to amortization
3. RMD method — recalculates each year based on prior 12/31 balance + life expectancy. Lowest withdrawals.

The IRS rules

• Choose ONE method at start; can swap to RMD method ONCE during plan
• Cannot add or remove money from the IRA during SEPP period
• Modify in any way → 10% penalty applies retroactively to ALL prior SEPP withdrawals + interest
• Maximum interest rate: 120% of mid-term AFR or 5%, whichever is higher (post-2022)

When SEPP makes sense

• Early retirement (50-58) with most assets in IRAs
• No 401(k) "rule of 55" available
• Need predictable, IRS-blessed income stream
• Confident you won't need to flex withdrawals (the $50k Roth ladder + cash buffer is more flexible)

When SEPP doesn't

• Married with substantial taxable assets — Roth ladder is more flexible
• Income changes ahead — SEPP locks in payment level for years
• You're 56-57 — wait 18-30 months to 59½, no SEPP needed