72(t) (Substantially Equal Periodic Payments) Calculator

If you need income from your IRA prior to age 59 ½ and want to avoid the 10% early distribution penalty, our calculator can be used to determine 72(t) payments, also referred to as Series of Substantially Equal Periodical Payments (SOSEPP).

Internal Revenue Code (IRC) Section 72(t)(2)(iv) stipulates the 10% penalty will not apply to distributions that are a part of a SOSEPP that are made at least annually, and made for the life or life expectancy of the IRA owner or joint lives or joint life expectancies of the IRA owner and beneficiary.

IRC Section 72(t)(4)(A) states that in the case where an IRA owner cancels or modifies their 72(t) distribution schedule, before the later of five years or age 59 ½, a 10% early distribution penalty will apply retroactively to all payments made prior to age 59 ½. A modification normally occurs upon a change in the payment schedule (distributing more (or less) than the determined annual income), or a change (i.e., rollover or contribution) in the balance of the account from which 72(t) payments are being made. An exception applies in the case of the IRA owner's death or disability or a one-time switch from the amortization or annuitization method to the Required Minimum Distribution (RMD) method.

The Internal Revenue Service (IRS) has approved three methods to calculate your 72(t) distribution amount: annuitization, amortization, and RMD method.

For purposes of this analysis, the distribution amounts are shown as annual figures. However, you may choose to make withdrawals monthly, quarterly or semi-annually.

Account balance ($) 
Client's age 
Beneficiary's age 
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Before-tax hypothetical rate of return on investment (%)help
Reasonable distribution interest rate (%)help

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 information provided is not directed at any investor or category of investors and is provided solely as general information about Lord Abbett’s products and services and to otherwise provide general investment education. None of the information provided should be regarded as a suggestion to engage in or refrain from any investment-related course of action, as neither Lord Abbett nor its affiliates are undertaking to provide impartial investment advice, act as an impartial adviser, or give advice in a fiduciary capacity. If you are an individual retirement investor, contact your financial advisor or other fiduciary about whether any given investment idea, strategy, product or service may be appropriate for your circumstances.

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