What is a 72(t) distribution or SEPP?
If you would like to begin withdrawing money before age 59½, you can take a 72(t) distribution from your IRA and begin receiving substantially equal periodic payments (SEPPs). By doing so, you’ll avoid the 10% early withdrawal penalty and can preserve the tax status of your remaining savings. For a Traditional IRA, that means your savings has the potential to continue to compound tax deferred, and for a Roth IRA, your earnings have the potential to grow tax free. Wondering if a 72(t) distribution is right for you? Well, if you need supplemental income and have exhausted other means, or if you are taking an early retirement, it may be worth considering. But keep in mind that you’re draining a savings vehicle that’s designed to help support you during your later years. The amount of your SEPPs primarily depends on your IRA balance and your life expectancy, which is calculated using your current age. The IRS has approved three methods for figuring out your exact SEPP amount: The amortizat
