72(t) SEPP.

In plain English

SEPP stands for substantially equal periodic payments, named after section 72(t) of the tax code. It is a way to tap an IRA or other retirement account before 59 and a half without the 10% early-withdrawal penalty. The trade-off is strict: you must take a fixed, IRS-calculated amount every year for at least five years or until you reach 59 and a half, whichever is longer. You still owe income tax on the withdrawals. If you change the payment amount or stop early, the IRS can claw back the penalties on everything you took, plus interest. It is a serious commitment, not a flexible faucet.

01Why it matters

It is one of the few legal ways to reach IRA money early without the penalty, but breaking the schedule retroactively triggers penalties on every prior payment.

02The math, step by step

At 52 you set up a SEPP on a $400,000 IRA using one of the three IRS-approved methods. That choice fixes your annual payment, and the size depends on the method you pick and the interest-rate assumption the IRS allows, so two people with the same balance can have different payments. Once set, you must take that same amount yearly until 59 and a half. Skip or change it at 56, and the IRS can retroactively apply the 10% penalty to all the payments you already took.

03What this is NOT

04Receipts

Every figure on this page is sourced to a primary document. Tap to open the original.