72(t) / SEPP Calculator

What is Rule 72(t) / SEPP?

IRC §72(t)(1) imposes a 10% additional tax on early withdrawals from individual retirement accounts and similar plans. The tax applies to distributions taken before age 59½. One of the statutory exceptions, §72(t)(2)(A)(iv), permits penalty-free withdrawals if they are part of a series of substantially equal periodic payments (SEPP) calculated based on the account holder's life expectancy.

Colloquially called "Rule 72(t)," this strategy allows someone retiring early — say, at age 50 — to draw from an IRA without the 10% penalty. The governing guidance for series beginning on or after January 1, 2023 is IRS Notice 2022-6, which supersedes Rev. Rul. 2002-62. Notice 2022-6 introduced a higher interest-rate cap and updated life expectancy tables.

The three IRS-approved calculation methods

Notice 2022-6 Q&A 3 codifies three methods. All three produce an annual payment that qualifies under §72(t)(2)(A)(iv) if all conditions are met. They produce different payment amounts; account holders choose one method at the time the series begins.

1. Required Minimum Distribution (RMD) method

Annual payment = account balance ÷ life expectancy from the Single Life Table (§1.401(a)(9)-9(b), T.D. 9930). The payment is recalculated every year using the then-current balance and the life expectancy factor for the new age. Because the balance fluctuates with investment performance, this method produces variable payments — but it has the lowest recapture risk since it explicitly re-anchors to the current balance each year.

Annual payment = account balance ÷ single-life expectancy factor

2. Fixed Amortization method

Annual payment = account balance ÷ present-value annuity factor a_n, where n is the life expectancy from the Single Life Table and i is the chosen interest rate. This produces a level, fixed payment for the life of the series. It is typically the method that produces the highest payment for a given balance.

a_n = (1 − (1 + i)^(−n)) / i Annual payment = account balance ÷ a_n

3. Fixed Annuitization method

Annual payment = account balance ÷ actuarial annuity factor (AF), where AF is computed from the mortality table in §1.401(a)(9)-9(e) (T.D. 9930). The formula discounts survival probabilities at the chosen interest rate:

AF = Σ₁ⁿ [ (lₙ₊ₜ / lₙ) × (1 / (1+i))ᵗ ] Annual payment = account balance ÷ AF

In practice, fixed amortization and fixed annuitization produce nearly identical payments. The Notice 2022-6 example (Q&A 7) shows amortization at $21,102/year vs. annuitization at $22,030/year for a $400,000 balance at age 50 with a 4% interest rate — a 4% difference. Most practitioners use fixed amortization because it does not require the mortality table computation.

Interest rate cap

Notice 2022-6 Q&A 5 sets the maximum allowable interest rate at the greater of 5% or 120% of the applicable federal mid-term rate (AFR) for either of the two months immediately preceding the month in which the distribution begins. For series beginning in early 2026, 120% of the January 2026 federal mid-term AFR is approximately 4.57% — below the 5% floor, so the 5% cap applies. Using a higher rate would disqualify the series, triggering recapture.

You are not required to use the maximum rate. A lower rate produces a smaller payment — and a smaller required balance for a target payment. Some planners choose a lower rate to build in a cushion against interest-rate changes, though the rate is fixed at the start of the series.

Recapture risk — the critical constraint

Under IRC §72(t)(4), the SEPP exception is retroactively disqualified if the series is modified before the later of the account holder reaching age 59½ and 5 full years from the first distribution date. If the series is modified — by taking too much, too little, skipping a payment, or changing the method — the 10% penalty reactivates for all prior years with interest. The IRS charges interest on the underpaid penalty from each original distribution date.

For a 50-year-old, the required run is until age 59½ (9.5 years, since 9.5 > 5). For a 56-year-old, the required run is 5 years (age 61), since 5 > 3.5.

One permitted modification: Notice 2022-6 Q&A 6 allows a one-time irrevocable switch from the fixed amortization or fixed annuitization method to the RMD method. This is useful if the account declines sharply — switching to RMD resets the payment to the new (lower) balance. No switch in the other direction is permitted.

Single Life Table

All three methods use the Single Life Expectancy Table from §1.401(a)(9)-9(b) of the regulations as updated by T.D. 9930 (effective for distributions beginning on or after January 1, 2022). For the RMD method, the factor is looked up fresh each year at the new age. For fixed amortization and annuitization, it is locked at the age in the first distribution year.

Reverse-solve: sizing the SEPP balance for a target payment

Not everyone wants to know how much a given IRA balance pays — some want to know how much of their IRA to commit to a SEPP series to hit a target income. The reverse-solve inputs a target annual payment and computes the required balance via fixed amortization:

Required balance = target payment × a_n Aside balance = total IRA balance − required balance

The "aside" balance is the portion you can keep outside the SEPP series. It is not subject to SEPP rules — but if it is in an IRA and you are under 59½, any withdrawal from that portion is still subject to the 10% early penalty unless another exception applies.

What this calculator does not model

• Joint and last survivor tables. The IRS permits use of the Joint and Last Survivor Table (§1.401(a)(9)-9(d)) when the sole beneficiary is a spouse more than 10 years younger. This calculator uses single life only.
• Taxes on distributions. SEPP distributions are ordinary income in the year received. The calculator shows gross payments before federal or state income tax.
• Investment return / account depletion. The calculator shows the first-year payment under each method. It does not project whether the account will be depleted before the series ends — that depends on investment returns, fees, and the actual payment amount.
• Multiple-IRA aggregation. An account holder may establish one SEPP series from multiple IRAs aggregated together, or separate SEPP series from separate IRAs simultaneously. The calculator computes a single series from a single balance.
• 403(b), 401(k), and other plan types. The §72(t) exception applies to IRAs and certain employer plans, but the rules for employer plans have differences. This calculator is designed for traditional and SEP IRAs only.
• 2026 U.S. federal — staleness-review item. IRS AFR rates are published monthly; the interest rate cap changes accordingly. Review the current AFR at irs.gov before setting a rate.

Sources: IRS Notice 2022-6 (2022-05 IRB) · T.D. 9930 (85 FR 72472) · IRC §72(t)(2)(A)(iv) · Treas. Reg. §1.401(a)(9)-9

This tool is for informational and educational purposes only. It is not financial, tax, or legal advice. SEPP rules under IRC §72(t) are complex; errors can result in substantial tax liability. Consult a qualified tax or financial professional before beginning a substantially equal periodic payment series.

Last reviewed: June 2026 · Per IRS Notice 2022-6 and T.D. 9930.