Retirement calculator

Free sepp 72(t) distribution calculator

Compare the three IRS SEPP methods — RMD, amortization, and annuitization — and the annual penalty-free distribution each yields, updated live, as you type.

On this page12 sections

InputsLive

What do you want to find?

Starting balance

Annual withdrawal

Expected return

Result

Your money lasts

23 yr 9 mo

Withdrawing $40,000 a year from $500,000 at 6%, the balance reaches zero in about 23.8 years.

First-year interest$30,000

Total withdrawn$951,844

Withdrawal rate8%

Depletion timeline

Year	Start balance	+ Growth	− Withdrawal	End balance
1	$500,000	$30,000	$40,000	$490,000
2	$490,000	$29,400	$40,000	$479,400
4	$468,164	$28,090	$40,000	$456,254
7	$430,247	$25,815	$40,000	$416,062
10	$385,087	$23,105	$40,000	$368,192
13	$331,301	$19,878	$40,000	$311,179
16	$267,240	$16,034	$40,000	$243,275
19	$190,943	$11,457	$40,000	$162,400
22	$100,073	$6,004	$40,000	$66,077
24	$30,042	$1,803	$31,844	$0

Estimates only, on a constant return and fixed withdrawal. Not financial advice.

Results are estimates. Consult a professional.

Overview

SEPP 72(t) distribution: the three calculation methods

A SEPP 72(t) distribution is the fixed annual payment you take from a retirement account before age 59½ to avoid the 10% early-withdrawal penalty. This SEPP 72(t) distribution calculator focuses on the calculation itself: the IRS approves exactly three methods — the required minimum distribution method, the fixed amortization method, and the fixed annuitization method — and each one produces a different annual payment from the same account.

Choosing the method is the single most important SEPP decision, because it sets the dollar amount you are locked into for the longer of five years or until 59½. This page walks through how each method computes the distribution, shows the payment all three yield on an identical account, and explains why retirees who need the largest penalty-free income almost always choose amortization or annuitization over the RMD method.

Balance divided by a single-life-expectancy factor; recalculated every year, so the payment moves with the account value.

Amortizes the balance over life expectancy at a chosen rate, like a loan payment; the dollar amount is fixed for the whole term.

Divides the balance by an annuity factor built from a mortality table and the chosen rate; also a fixed dollar amount.

The amortization and annuitization methods may use any rate up to 5% under IRS Notice 2022-6.

The methods

How each of the three SEPP methods is calculated

All three methods spread the account over your life expectancy, but they differ in how they turn the balance into a yearly number. The RMD method produces the smallest payment; amortization and annuitization produce larger, fixed payments that are usually close to each other.

1. Required minimum distribution method

Annual = prior-year-end balance ÷ life-expectancy factor

Recalculated every year with the new balance and factor

2. Fixed amortization method

Annual = balance × r / (1 − (1 + r)^−n)

r = chosen rate (≤ 5%), n = life expectancy in years

3. Fixed annuitization method

Annual = balance ÷ annuity factor

annuity factor built from an IRS mortality table at rate r

IRS — Substantially equal periodic payments: "made according to one of three methods: (1) the required minimum distribution method, (2) the fixed amortization method, or (3) the fixed annuitization method."

Inputs

How to use the SEPP distribution calculator

The calculator computes the fixed amortization distribution from three live inputs:

Account balance — the value of the IRA or plan funding the SEPP. You can base the SEPP on part of a larger account.
Age — your current age, which sets the life-expectancy term (the younger you are, the longer the term and the smaller each payment).
Federal mid-term rate — the assumed rate, capped at 5%. Raising it within the cap raises the amortization and annuitization payments.

The output is the annual and monthly amortization-method distribution. Use the method comparison below to see how the RMD method would shrink that figure and why the choice matters.

Worked example

A worked SEPP distribution example, all three methods

Example: $500,000 IRA, age 55, 5% rate

Daniel is 55 with a $500,000 IRA and uses the maximum 5% rate. With a life-expectancy factor of 29.5 years, here is the distribution each method produces.

Amortization method (the calculator's output)

Annual = 500,000 × 0.05 / (1 − 1.05^−29.5)

Annual = 32,769.32

Monthly = 32,769.32 / 12 = 2,730.78

$32,769.32/yr — $2,730.78/mo (amortization)

This is what the calculator returns: the fixed, penalty-free annual distribution Daniel locks in until age 60. The RMD method on the same account would pay only about $16,949 (balance ÷ 29.5), while annuitization lands very close to amortization at roughly $32,769.

The lesson: at the same balance, age, and rate, amortization and annuitization pay nearly twice what the RMD method pays. Most early retirees pick amortization for the larger, predictable income; the RMD method is chosen when you want a smaller, balance-linked payment that falls if markets drop.

Reference

The three methods compared on $500,000 at age 55

Method	Annual distribution	Fixed or recalculated?
RMD method	$16,949	Recalculated each year
Fixed amortization	$32,769	Fixed for the term
Fixed annuitization	≈ $32,769	Fixed for the term

$500,000 balance, age 55, 5% rate, 29.5-year life-expectancy factor. Amortization figure computed by this calculator; RMD method = balance ÷ 29.5; annuitization approximated at the amortization level.

The IRS permits a one-time switch from a fixed method (amortization or annuitization) to the RMD method without busting the SEPP. Many retirees use this escape valve when a market downturn makes the fixed payment uncomfortably large relative to the shrunken account.

IRS Notice 2022-6 — the three methods, the 5% maximum interest rate, and the one-time switch to the RMD method.

Decision

Which SEPP method should you choose?

Need the most penalty-free income? Amortization or annuitization — they pay roughly the same and far more than the RMD method.
Want a payment that flexes with the market? The RMD method recalculates yearly, so it falls in a downturn and reduces the risk of draining the account.
Worried about a future market drop? Start with a fixed method, then use the one-time switch to the RMD method if the account shrinks.
Want to fine-tune the dollar amount? Adjust the account balance you base the SEPP on rather than the method — splitting the account is the cleanest lever.

For the bigger picture of why a SEPP avoids the penalty and the lock-in rules around it, see the 72(t) SEPP overview. To weigh a SEPP against simply paying the penalty, use the early withdrawal penalty calculator.

Gotchas

Calculation mistakes that bust a SEPP

Using a rate above 5%. The amortization and annuitization rate is capped — exceeding it disqualifies the schedule.
Switching methods more than once. Only one change is allowed, and only from a fixed method to the RMD method.
Recalculating a fixed method. Amortization and annuitization payments stay fixed; recomputing them each year is a modification.
Mismatching the life-expectancy table. The factor must come from an IRS-approved table for your chosen method.
Rounding the payment. Take the calculated amount precisely — taking a rounded or convenient figure can be treated as a modification.

Accuracy

Accuracy, assumptions, and sources

This SEPP 72(t) distribution calculator computes the fixed amortization payment using a life-expectancy term and a rate capped at 5%, per IRS Notice 2022-6. The RMD-method and annuitization figures shown for comparison are illustrative on the same inputs; true annuitization uses an IRS mortality-table annuity factor, and the RMD method recalculates annually. Because a busted SEPP retroactively triggers the 10% penalty plus interest, this is a planning estimate, not tax advice — confirm your method, table, and rate with a tax professional and the IRS sources below.

IRS — Substantially equal periodic payments (the three SEPP methods).IRS Notice 2022-6 — Determination of substantially equal periodic payments.

Questions

Frequently asked questions about the free sepp 72(t) distribution calculator

A SEPP 72(t) distribution calculator is a free online tool that helps you same as 72(t) — calculate substantially equal periodic payments. Same engine. It runs entirely in your browser with instant results and no sign-up.

The IRS approves the required minimum distribution method, the fixed amortization method, and the fixed annuitization method. The RMD method recalculates each year and pays the least; amortization and annuitization are fixed and pay roughly the same, larger amount.

The fixed amortization and fixed annuitization methods pay the most and are usually close to each other. On a $500,000 IRA at age 55 with a 5% rate, amortization pays about $32,769 a year, while the RMD method pays only about $16,949.

It amortizes the balance over your life expectancy at a chosen rate, like a loan payment: annual = balance × r ÷ (1 − (1 + r)^−n). For $500,000 at age 55 and 5%, that is $32,769.32 a year, or about $2,730.78 a month.

Yes, once. The IRS permits a single switch from a fixed method (amortization or annuitization) to the RMD method without busting the plan. Many people use this if a market drop makes the fixed payment too large relative to the shrunken account.

Usually only slightly. Annuitization divides the balance by an annuity factor from an IRS mortality table at the chosen rate, and the result typically lands very close to the amortization figure.

About

About this SEPP 72(t) distribution calculator

This SEPP 72(t) distribution calculator focuses on the calculation itself: the IRS approves three methods — the required minimum distribution method, the fixed amortization method, and the fixed annuitization method — and each produces a different annual penalty-free payment. The tool computes the fixed amortization distribution and the page compares all three.

For the rules and lock-in, see the 72(t) SEPP overview, the rest of our retirement calculators, or the full calculators directory. This is a planning estimate, not tax advice.