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72(t) calculator
Yearly 72(t) payments by the amortization and RMD methods, with the IRS life expectancy table.
72(t) payments let you take money from an IRA before 59½ without the 10% additional tax, if you keep to a fixed schedule. At 50, with $500,000 and a 5% interest rate, the fixed amortization method gives $30,156 a year; the payments must continue for 9.5 years, until 59½.
Fixed amortization payment
$30,156 a year
RMD method: $13,812 in the first year, recalculated each year. Life expectancy used: 36.2 years.
Payments must continue for 9.5 years, until 59.5. Changing them earlier brings back the 10% tax on past payments, plus interest.
| Interest rate | Amortization a year | A month |
|---|---|---|
| 3% | $22,831 | $1,903 |
| 4% | $26,377 | $2,198 |
| 5% | $30,156 | $2,513 |
| 6% | $34,142 | $2,845 |
The methods the IRS allows
- Fixed amortization. The balance is paid out like a loan over your life expectancy at a chosen interest rate. The payment stays the same every year.
- Required minimum distribution. The balance divided by your life expectancy, recalculated each year, so the payment changes.
- Fixed annuitization. The balance divided by an annuity factor from an IRS mortality table. This calculator leaves it out.
The interest rate cannot exceed the greater of 5% or 120% of the federal mid-term rate for either of the two months before the first payment (IRS Notice 2022-6).
Payments by age
Fixed amortization on $500,000 at 5%, with the IRS Single Life Expectancy Table:
| Age at start | Life expectancy | Payment a year | Must last until |
|---|---|---|---|
| 45 | 41 | $28,911 | 59.5 |
| 50 | 36.2 | $30,156 | 59.5 |
| 55 | 31.6 | $31,807 | 60.0 |
Breaking the schedule
Payments must continue for 5 years or until you reach 59½, whichever is later. Changing them earlier, other than one switch to the RMD method, brings back the 10% additional tax on every payment taken so far, plus interest.
Questions people ask
What is the 72t rule?
A section of the tax code that exempts substantially equal periodic payments from the 10% additional tax on early withdrawals. The payments are worked out from your life expectancy with one of the IRS methods and must continue on schedule.
How long do you have to take 72t distributions?
For 5 years or until 59½, whichever comes later. Starting at 50 that is 9.5 years; starting at 57 it is 5 years, until 62.
Related
72(t) SEPP rules explained covers the conditions in more detail, and the rule of 55 is another way to reach a workplace plan early.
This calculator is an illustration of the IRS formulas, not tax advice. A 72(t) plan is hard to undo; check the numbers with your account provider or a tax professional before starting. See the disclaimer.
Sources
- Internal Revenue Service, Notice 2022-6, determination of substantially equal periodic payments.
- Internal Revenue Service, Retirement plans FAQs regarding substantially equal periodic payments.
- Internal Revenue Service, Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs).
- Internal Revenue Service, Topic no. 557, Additional tax on early distributions from traditional and Roth IRAs.
Last reviewed by Asier Fernández, editor, on . Educational information only, not financial advice. How we calculate