Withdrawals & RMDs
A 72(t) calculator for retiring before 59½ without the penalty
A 72(t) SEPP calculator using the amortization method: early retirees enter balance, interest rate and life expectancy to estimate the annual payment that avoids the early-withdrawal penalty.
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How do 72(t) payments avoid the early-withdrawal penalty?
Substantially equal periodic payments, figured by an IRS-approved method from the account balance, an interest rate and a life expectancy, are exempt from the additional tax on early distributions. The rule: Payments run 5 years or to age 59½, whichever is longer; rate up to the greater of 5% or 120% of the federal mid-term rate2026 · IRS Notice 2022-6. Breaking the schedule triggers the penalty retroactively on all payments.
The months before an early retirement
People planning to retire in their early fifties, often after a buyout or a business sale, discover that most of their savings are in IRAs they can't touch without a penalty. They find the 72(t) rule online and want to know how much it would pay before committing to a schedule that may last a decade.
What the client types into a search box
“how can I take money from my IRA before 59 and a half without penalty”
How a client works through it
Enter the account balance
The IRA balance the schedule will be based on.
Enter the interest rate
A rate within the IRS maximum for the start month.
Enter life expectancy
The factor from the IRS table chosen.
See the payment
Annual and monthly SEPP payment by the amortization method.
What lands in your inbox
When a client asks your firm to review the result, the request arrives as a contact record with their inputs and results attached, by email and, on paid plans, by webhook to your CRM.
Received
Balance, rate and life expectancy show the size of the account and the payment the client is considering. A large balance with a long schedule ahead suggests splitting the IRA. Interest rates entered at the maximum point to a client trying to maximize income, which needs careful checking against the rules.
How should a client read the SEPP payment?
Annual SEPP Payment is the fixed yearly amount under the amortization method; Monthly Equivalent divides it by twelve. Interest Rate Used and Life Expectancy confirm the assumptions.
Higher rates or shorter life expectancies raise the payment, but the rate must stay within the IRS maximum, and the payment can't be changed later except for a one-time switch to the RMD method.
Results shown: Annual SEPP Payment · Monthly Equivalent · Account Balance · Interest Rate Used · Life Expectancy.
Why should early-retirement questions reach a professional?
A 72(t) plan is a multi-year commitment where one mistake retroactively penalizes every payment. Clients exploring it need help choosing the method, rate and account, and often an IRA split so only part of their savings is committed.
These clients typically have substantial assets and complex years ahead, which makes them valuable relationships for both advisers and CPA firms.
Follow-ups this request opens
- Choose the method and interest rate within IRS rules
- Split IRAs so only the needed amount is committed
- Compare 72(t) with the age-55 separation rule for 401(k)s
- Document the schedule and track it every year
What this calculator leaves out
- Amortization method only; the RMD and annuitization methods are not shown.
- Does not look up the maximum allowed rate or life expectancy factor.
- Income tax on payments is not calculated.
- Does not track the schedule over time.
Platform disclaimer shown under the calculator: Estimates only. Uses the 72(t) amortization method; the max interest rate, life-expectancy table and rules are IRS-set, and payments must continue for 5 years or until age 59½ (whichever is longer) or penalties apply retroactively. Consult a tax professional.
Compliance note for firms
A 72(t) schedule is high-risk tax planning; an error penalizes every payment retroactively. Any recommendation is written advice under Circular 230 §10.37 and should document the method, rate source and account used. Keep the calculator framed as an estimate.
Not legal advice. See our disclaimer and the guide to compliance for client calculators.
2026 figures this page relies on
| Figure | Value | Tax year | Source |
|---|---|---|---|
| 72(t) SEPP payment duration and interest-rate rule | Payments run 5 years or to age 59½, whichever is longer; rate up to the greater of 5% or 120% of the federal mid-term rate | 2026 | IRS Notice 2022-6 |
| Additional tax on early retirement distributions | 10% before age 59½ (age-55 separation-from-service exception for plans) | 2026 | IRS |
The same values drive the calculator. Full list on the 2026 figures page.
Terms your client sees in the calculator
These definitions appear in the calculator's collapsible Definitions block, so clients don't have to call to ask what a label means.
- Substantially equal periodic payments (SEPP)
- A series of withdrawals from an IRA or similar account, calculated under IRS rules, that is exempt from the early-withdrawal penalty under Section 72(t). Once started, the payment schedule is locked. This calculator estimates the annual and monthly payment from your balance, the interest rate and your life expectancy factor.
- Amortization method
- One of three IRS-approved ways to size SEPP payments, and the one this calculator uses. It treats the account like a loan paid off over your life expectancy at the chosen interest rate, producing a fixed annual payment. It usually yields a higher payment than the required minimum distribution method and close to the annuitization method.
- Interest rate
- The rate used to amortize the balance, not a return you are promised. Under IRS Notice 2022-6 (effective 2022) it may be any rate up to the greater of 5% or 120% of the federal mid-term rate for either of the two months before the first payment. A higher allowed rate produces a larger annual payment.
- Life expectancy factor
- The number of years, from an IRS table, used as the payout period. For the Single Life Expectancy Table in use since 2022 (IRS), the factor is 36.2 at age 50, 31.6 at 55 and 27.1 at 60. Use your age in the first distribution year. A lower factor spreads the balance over fewer years and raises the payment.
- Federal mid-term rate
- One of the applicable federal rates the IRS publishes each month, based on yields of Treasury securities with medium maturities. For a SEPP it sets part of the ceiling on the interest rate you may use. Because it changes monthly, the maximum allowed rate depends on when your first payment is taken.
- Modification rule
- Payments must continue unchanged for 5 years or until age 59½, whichever is longer (IRS, 2026). Changing the amount, adding money or taking an extra withdrawal before then generally triggers the penalty retroactively on every earlier payment, plus interest. A one-time switch to the RMD method is allowed.
In our glossary: Substantially equal periodic payments · Early withdrawal penalty
72(t) SEPP calculator: questions from firms and clients
How long must 72(t) payments continue?
Payments run 5 years or to age 59½, whichever is longer; rate up to the greater of 5% or 120% of the federal mid-term rate2026 · IRS Notice 2022-6.
What interest rate can I use?
Under Notice 2022-6, up to the greater of 5% or 120% of the federal mid-term rate for either of the two months before the first payment.
What if I change the payments?
The additional tax of 10% before age 59½ (age-55 separation-from-service exception for plans)2026 · IRS applies retroactively to all payments, plus interest, unless an exception applies.
Can I switch methods?
A one-time switch to the RMD method is allowed.
Is the 72(t) payment taxable?
Yes, as ordinary income; only the penalty is avoided.
Is there an easier option?
If you leave an employer in or after the year you turn 55, that employer's 401(k) may allow penalty-free withdrawals. Compare before committing.
Can I use only part of my IRA?
Yes, by splitting the IRA first and basing the schedule on one account.
Which plan includes it?
Network. See pricing.
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