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Early Distribution Alternatives (Section 72(t)) Calculator

Our 72(t) calculator helps you determine the allowable distribution amounts for taking an IRA distribution prior to age 59½ without incurring an early distribution penalty.



Required minimum distributions (RMDs) must commence from a traditional IRA by April 1, following the year when the IRA owner attains age 72. An RMD must be taken from the IRA in each subsequent year. Failure to take an RMD will result in a 50% penalty on the amount that was not distributed. RMDs that represent deductible contributions and all earnings are taxed as ordinary income. RMDs that represent deductible contributions are tax-free.

Required Minimum Distribution method. Distribution is determined according to the rules for determining RMDs. The IRA owner’s account balance is divided annually by a factor using an approved IRS life expectancy table.

Amortization method. Annual payments are determined by amortizing an individual’s account balance over several years, based on a reasonable interest rate and their life expectancy as determined by an approved IRS table. The annual payout is fixed and thus does not fluctuate year-to-year.

Annuitization method. The annuitization method is similar to the amortization method in that it uses a reasonable interest rate and life expectancy factor but also introduces a mortality table prescribed by IRS regulation to distribute the IRA account as if it were an annuity. Annuity factors are provided by the IRS, and the present value is determined using a reasonable interest rate. The annual payout is fixed at the time distributions commence and does not vary year-to-year.

Neither the amortization nor the annuitization method allows the payment schedule to be changed from one year to the next. An individual who begins their 72(t) payment schedule with distributions calculated using either method can make a one-time switch to the RMD method—without the switch being deemed a modification. However, there is no option to switch back to the amortization or annuitization method from the RMD method.

Although the RMD method does not use an interest rate, all three methods do use Life Expectancy tables.

IRS Notice 2022-6 indicates that new IRS life expectancy tables may be used for 72(t) payment schedules starting in 2022 and must be used for 72(t) payment schedules starting in 2023. The Notice also indicates that a modification will not occur if, while using the RMD method, an individual switches from using the old life expectancy tables to the new tables.

Information and interactive calculators are provided to you as self-help tools for your independent use and are not intended to provide investment advice. We cannot and do not guarantee their applicability or accuracy for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all financial issues.

Projected return rates are hypothetical and have been selected by you or your financial adviser. They are not representative or suggestive of any Lord Abbett returns. Legislative and/or regulatory actions can affect your actual outcome either positively or negatively.

The use of the calculators is provided for general educational purposes only and is not meant as legal, tax, financial, or investment advice. Lord Abbett does not provide legal, tax, or investment advice. The tax and financial information contained herein is general in nature, is provided for informational purposes only, is not individualized, and is not intended to serve as the primary or sole basis for your investment or tax-planning decisions. Lord Abbett cannot guarantee that such information is accurate, complete, or timely. Laws of a particular state or laws that may be applicable to a particular situation may have an impact on the applicability, accuracy, or completeness of such information. Federal and state laws and regulations are complex and are subject to change. Changes in such laws and regulations may have a material impact on pre- and/or after-tax investment results. The results of these calculations are estimates based solely on user input and the assumptions of the calculator program. All examples are hypothetical and intended for illustrative purposes only. Lord Abbett makes no warranties with regard to such information or results obtained by its use. Lord Abbett disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Investment results do not represent the future performance of any Lord Abbett funds. You should consult with your legal or tax advisor before making any investment decision.

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