72(t) SEPP Calculator

If you're retiring before 59½ and can't wait five years for a Roth conversion ladder, a 72(t) Substantially Equal Periodic Payment (SEPP) plan lets you draw from your IRA penalty-free — starting now. The IRS has approved three calculation methods, each producing a different annual payment. Enter your details to see all three.

Understanding the three methods

Method 1: RMD (Lowest payment, recalculated annually)

Divide your IRA balance by the life expectancy factor for your age from the IRS Single Life Expectancy Table (Pub 590-B, Table I). This produces the lowest payment of the three methods — but the amount changes each year as your balance grows or shrinks. In a strong market, your payment rises. In 2008 or 2022, it drops. Useful if you have other income and want minimal taxable distributions while leaving as much as possible in the IRA. The flexibility comes at the cost of income predictability.

Method 2: Fixed amortization (Most popular)

Amortize your current balance over your life expectancy at the chosen interest rate, like a mortgage payment in reverse. This produces a fixed dollar amount that never changes for the life of the SEPP. Most early retirees choose this because the payment is substantially higher than the RMD method and the amount is predictable. Using the maximum 5% rate produces the highest allowed payment; choosing a lower rate gives a smaller, more conservative payment.

Worked example — age 52, $750,000, 4.5% rate: Life expectancy = 34.3 years. Annual payment = $750,000 × 0.045 ÷ (1 − 1.045^−34.3) = $43,324/year. This payment is fixed for the entire SEPP period, regardless of what the market does.

Method 3: Fixed annuitization (Similar to amortization)

Divides the account balance by an annuity factor from IRS actuarial mortality tables (Rev. Proc. 2002-62, Appendix B, Table V or VI). Produces a fixed payment nearly identical to the amortization method — typically within 1–3% — but the calculation is more involved. Less commonly used in practice for that reason. If the amortization amount fits your plan, you don't need the annuitization method.

The commitment clock: 5 years or 59½, whichever is later

The SEPP must continue without modification until both conditions are met: (1) you have taken payments for at least 5 years, and (2) you are at least age 59½. The binding constraint is whichever comes later.

• Starting at 52: 59½ is 7.5 years away — that's your commitment (longer than 5 years).
• Starting at 56: 5 years lands at 61, which is past 59½ — you must run to 61.
• Starting at 45: 59½ is 14.5 years away — your SEPP runs until 59½.

After the SEPP ends, you can stop distributions, change the amount, or roll the IRA anywhere — penalty for the SEPP period is fully discharged.

Rule of 55: The simpler alternative (401(k) and 403(b) only)

If you separated from your employer during or after the calendar year you turned 55, you can take penalty-free withdrawals from that employer's 401(k) or 403(b) — no fixed schedule, no irrevocable commitment, any amount you choose. This is the Rule of 55 under IRC § 72(t)(2)(A)(v). Public safety employees (police, fire, EMS, corrections, federal law enforcement, air traffic control) qualify at age 50 instead of 55.

Important: Rolling your 401(k) to an IRA before invoking Rule of 55 eliminates the exception — IRA withdrawals are governed by different rules. Conversely, rolling a traditional IRA into your current employer's 401(k) (if the plan allows) can make those funds eligible for Rule of 55. Neither move should be made without modeling the full tax picture first.

How SEPP coordinates with the Roth conversion ladder

Both strategies solve the same problem — pre-59½ IRA access — but with different timing. The Roth conversion ladder converts IRA → Roth today and lets you withdraw converted principal after a 5-year seasoning period, tax-and-penalty-free. SEPP starts penalty-free distributions immediately with no waiting period.

If you retire at 54 and need income in year one, SEPP is faster. If you retire at 49 with enough bridge assets to cover 5 years, the Roth ladder lets you convert at low rates now and withdraw penalty-free later. Most plans with a long enough lead time use both: SEPP for bridge income, Roth ladder to build a long-term tax-free bucket. The sequencing — which account to SEPP, how much to convert annually, how ACA MAGI interacts with both — is where specialist advice pays for itself.