Transparent method
The formula
Worked example
Example inputs
How to interpret the result
Once a 72(t) substantially equal periodic payment schedule begins, it generally has to continue unmodified for a fixed minimum period or until a specific age, whichever is later, and any modification to the payment amount or an early stop within that window can trigger retroactive penalties on every payment already taken, not just the one that changed.
Before you rely on it
What to check
Confirm the specific method and life-expectancy table selected are ones you're prepared to commit to for the full required period, since deviating early carries retroactive consequences.
The common error
Where people go wrong with 72(t) SEPP calculator
Assuming a 72(t) payment schedule can be adjusted or stopped early without consequence if circumstances change. Modifying the schedule within the required period generally triggers retroactive penalties on the payments already received.
Sensitivity evidence
How eligible account balance changes the RMD-method annual payment
| Eligible account balance | RMD-method annual payment | Amortization-method estimate |
|---|---|---|
| $400,000 | $13,333 | $25,767 |
| $450,000 | $15,000 | $28,988 |
| $500,000worked example | $16,667 | $32,209 |
| $550,000 | $18,333 | $35,430 |
| $600,000 | $20,000 | $38,651 |
Every input, tested
Which input moves the RMD-method annual payment most
| Input | Tested from | To | RMD-method annual payment at each end | Swing |
|---|---|---|---|---|
| Life-expectancy factor | 27 | 33 | $18,519 to $15,152 | $3,367 (20%) |
| Eligible account balance | $450,000 | $550,000 | $15,000 to $18,333 | $3,333 (20%) |
| Permitted interest-rate assumption | 4.0% | 6.0% | $16,667 to $16,667 | none |
Two variables at once
RMD-method annual payment by eligible account balance and life-expectancy factor
| Eligible account balance \ Life-expectancy factor | 24 | 30 | 36 |
|---|---|---|---|
| $400,000 | $16,667 | $13,333 | $11,111 |
| $450,000 | $18,750 | $15,000 | $12,500 |
| $500,000 | $20,833 | $16,667 | $13,889 |
| $550,000 | $22,917 | $18,333 | $15,278 |
| $600,000 | $25,000 | $20,000 | $16,667 |
Step by step
The worked example, input by input
| Input | Value used |
|---|---|
| Eligible account balance | $500,000 |
| Life-expectancy factor | 30 |
| Permitted interest-rate assumption | 5.0% |
| RMD-method annual payment | $16,667 |
| Amortization-method estimate | $32,209 |
Where the inputs come from
Eligible account balance is the IRA balance used for the calculation, life-expectancy factor comes from one of the IRS tables, and the interest-rate assumption for the amortization method is capped at the greater of 5% or 120% of the federal mid-term rate. Payments must continue for five years or until age 59½, whichever is longer. Use the balance at the date the plan starts and confirm the tables with a tax professional, since errors are costly.
When the result stops applying
If you modify the payments, such as by taking more, less or adding money to the account, before the period ends, the IRS applies the 10% penalty retroactively to all distributions plus interest. The fixed annuitization method, not shown here, is a third option. The calculation uses simplified assumptions, and the IRS requires exact rules. Taxes still apply to the payments.
What to compare it with
Compare with other ways to reach money early: the early 401(k) withdrawal calculator covers the Rule of 55, and the Roth conversion ladder is another route. The retirement income tax page estimates the tax on payments. Consider whether a taxable bridge account would be simpler.
People also ask
Frequently asked questions
What is a 72(t) plan?
A series of substantially equal periodic payments from an IRA that avoids the 10% early-withdrawal penalty if you follow IRS rules for at least five years or until age 59½.
What happens if I change the payments?
The penalty applies retroactively to all payments taken so far, with interest, so the schedule should be treated as fixed once started.
Which method gives the largest payment?
The amortization and annuitization methods usually give higher payments than the required-minimum method, since they spread the balance over the life expectancy at an assumed rate.