Recent Calculations
The IRS Rule 72T allows for penalty free, early withdrawals from retirement accounts. This calculator provides an advanced analysis of the 72(t) exception to the 10% federal penalty tax for withdrawals before age 59 1/2 from an IRA, Qualified Retirement Plan (QRP) or non-pension annuity. This projection is not representative of any specific product or investment.
The rules for these distributions require you to receive Substantially Equal Periodic Payments (SEPP) based on your life expectancy to avoid a 10% tax penalty on any amounts you withdraw. Payments must last for five years (the five-year period does not end until the fifth anniversary of the first distribution received) or until you are 59-1/2, whichever is longer. Further, the SEPP amount must be calculated using one of the IRS approved methods which include:
In addition, on October 3rd, 2002, the IRS ruled that you could change your distribution type one-time without penalty from the Annuitized or Amortized methods to the Life Expectancy method. This would allow account holders the option to move from a fixed payment type to a payment that fluctuates annually with the value of their account. The primary reason for this exception is to allow individuals who have suffered large losses, the option to reduce their distribution to prevent their retirement account from being prematurely depleted. For more information on this important exception please see 'Revenue Ruling 2002-62' on www.treasury.gov.
It is important to remember that while distributions are not subject to the 10% penalty for early withdrawal, all applicable taxes on the distributions must still be paid. Further, taking any early distributions from a retirement account reduces the amount of money available later during your retirement.
There are three different life expectancy tables that the IRS allows you to use when calculating your SEPP with the 'Fixed Amortization' or the 'Required Minimum Distribution' methods.
For SEPP calculations on or after January 1st, 2022 this calculator has been updated, as required by the Internal Revenue Service (IRS), to use the updated Life Expectancy tables finalized in November 2020. It is important to note that once you have chosen a distribution method and life expectancy table, you cannot change either throughout the course of your distributions. (Except for a one-time change from the Annuitized or Amortized methods to the Life Expectancy method, see SEPP definition for more details). The three life expectancy options are:
| Uniform Lifetime | This is a non-sex based table developed by the IRS to simplify minimum distribution requirements. The uniform lifetime table estimates joint survivorship, but does not use your beneficiary's age to determine the resulting life expectancy. This table can be used by all account owners regardless of marital status or selected beneficiary. |
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| Single Life Expectancy | This is a non-sex based life expectancy table. This table does not use your beneficiary's age to calculate your life expectancy. This table can be used by all account owners regardless of marital status or selected beneficiary. Choosing single life expectancy will produce the highest distribution of the three available life expectancy tables. |
| Joint Life Expectancy | This is also a non-sex based life expectancy table for determining joint survivorship using your oldest named beneficiary. |
The current account balance used to determine the distribution. For the RMD method, the balance on at the end of the previous year is used.
Please enter the account owner's name.
Please enter the account owner's birthdate. The tool uses this to calculate your age as of December 31st of the current year. This age is then used for life expectancy calculations.
Please enter the name of the account for this analysis.
Please enter the plan type. The plan type will not affect the calculations, it is used for descriptive purposes only.
The account balance as of December 31st of the previous year. This amount is only used for the Required Minimum Distribution (RMD) calculation method, the other methods use the current value of the account. The IRS rules allow for "an account balance to be determined in any reasonable manner based on the facts and circumstances".
The IRS provides an example of a reasonable determination of the account balance for the RMD method. This example is not a definitive rule and not specific to the other methods. The IRS example allows for use of an account balance from any daily value between December 31st (of the year prior to distributions beginning) and the actual date of the first distribution. For subsequent years the value on December 31st of the prior year could be used or the account balance on a date within a reasonable period of the distribution. This calculator assumes you wish to follow the IRS example by using the previous year ending balance for the RMD method.
In January of 2022, Notice 2022-6 specified a change to what is considered an acceptable interest rate when calculating distributions. Previously the rule set the maximum rate at 120% of the Federal Mid-Term rate. The new rule makes 5% the maximum unless the 120% of the Federal Mid-Term exceeds that amount. The Federal Mid-Term rate to use can be from either of the two months immediately preceding the month in which the distribution begins.
**72TRATE_DEFINITION** Click here for more information about Federal Interest rates.
It is important to note that the associated law that created 72(t)/(q) distributions did not define what was to be considered a reasonable interest rate. As such, the guidance from the IRS generally flows from the concept that they will not allow people to circumvent the requirement of substantially equal periodic payments (SEPP) throughout your lifetime by using an unreasonably high interest rate.
Please enter the beneficiary's name.
Please enter the account beneficiary's birthdate. The tool uses this to calculate the beneficiary's age as of December 31st of the current year. This age is then used for joint life expectancy calculations.