Glossary
Substantially equal periodic payments
Also called SEPP, 72(t)
Definition
Substantially equal periodic payments (SEPP), under IRC §72(t), let account owners take penalty-free withdrawals before 59½ by following an IRS-approved schedule: 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. Changing the schedule triggers the penalty retroactively.
How substantially equal periodic payments works
Three methods are allowed: required minimum distribution, amortization and annuitization. A one-time switch to the RMD method is permitted.
Many owners split an IRA first so only part of their savings is committed.
Why it matters to a firm
SEPP plans are high-stakes and technical; early retirees need professional setup.
| 2026 figure | 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 | IRS Notice 2022-6 |
Calculators that use substantially equal periodic payments
Questions about substantially equal periodic payments
How long must payments last?
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.
Are payments taxable?
Yes, as income; only the penalty is avoided.
Can I change the amount?
Only by a one-time switch to the RMD method.
No question matches that filter. Clear it to see them all, search the whole site, or ask us directly; we reply within one business day.
Related terms: Early withdrawal penalty
Next entry
Put the definition next to the number
Calculators on your site explain their own terms, in English or Spanish, before the client ever calls.
Firm and Network plans include a 14-day trial. Cancel before it ends and you pay nothing.