At age 59.5, all access restrictions to 401ks and IRAs are removed.

Sometimes people want to retire before then. (Hard to believe, I know.)

But what if most/all of your savings and investments happen to be in a retirement account? Or you prefer to hang on to the investments in your taxable account?

Fortunately there are a few options to tap retirement accounts early and penalty-free.

Accessing Retirement Accounts Before Age 59.5

It is possible to read for hours and hours (as I have) about early IRA withdrawals and come away with:
1) it’s complicated
2) it’s risky
3) you should hire an expert to advise you – see #1 and #2

But this is all nonsense.

I have a very simple goal – I just want to make reasonably sized IRA withdrawals in a tax (and penalty) efficient way, from the smallest possible portion of our portfolio, without significant commitment or hassle.

That is not difficult at all.

Options for (early) IRA withdrawals

There are 4 main options for accessing individual retirement accounts

The first option is the most common – Wait Until Fifty Nine and a Half. Almost anyone can do this so it isn’t very exciting.

The second option – Just Pay the Penalty – is almost universally frowned upon but its really not a bad solution, especially for heavy earners. Paying 10% penalty on a few withdrawals seems better than paying 22%-32%+ tax during our peak earning years.

Option 3 – Roth conversion ladder – is the topic of numerous early retirement blog posts and financial newsletters. In short, you can do a Roth conversion in Year 1 of retirement and then withdraw those funds for spending in Year 6, rinse, repeat. (This is my least favorite option, however, because if I am going through the bother of doing a Roth conversion I would prefer to have those funds grow for 50 years vs 5. This was of thinking was corrected in the comments.)

Which leaves us with our 4th possibility, a Series of Substantially Equivalent Periodic Payments, the main topic of this post.


In the most concise way possible…

The IRS says:

Under Section 72(t)(2)(A)(iv), if the distributions [from an IRA] are determined as a series of substantially equal periodic payments (called a “SoSEPP”) over the taxpayer’s life expectancy (…), the 10% additional tax does not apply.

This means you can make penalty-free withdrawals from an IRA before age 59.5 as long as you follow some rules around withdrawal size and duration.

In order for the distributions to be determined as a SoSEPP, withdrawal size needs to be calculated via 1 of the following:
– Required Minimum Distribution Method (like those required at age 73+, but 20+ years earlier)
– Fixed Amortization Method
– Fixed Annuitization Method

Once the withdrawal method and amount is determined, those withdrawals must continue for 5* years or until age 59.5, whichever is LONGER.

No modifications are allowed** – Do NOT add funds to this IRA, do not rollover a 401k into the IRA, do not do Roth conversions, do not make additional withdrawals… SEPP withdrawals and SEPP withdrawals ONLY (on this specific IRA.)

If these rules are not followed, the 10% penalty applies to ALL withdrawals (since the SEPP was formed) with back interest applied to the origination date. In addition, the SEPP agreement is now null and void so any future withdrawals are subject to the normal IRA withdrawal rules (I.e. subject to 10% penalty.)

IMPORTANT – don’t F this up, current interest rate for underpayments is 8% per year, compounded daily

* 5 years from the date of first withdrawal is NOT the same as the time to take 5 annual withdrawals.
** the only allowed change is a one-time / permanent switch from one of the fixed methods to the RMD method

All of this is outlined in IRS Notice 2022-6.

SEPP Calculations

If you look at any of the most popular SEPP calculators, they offer a ton of bells and whistles and allow you to make the full suite of choices.

That is nice, I suppose… if you want people to get frustrated/confused and run into the arms of a high price financial advisor. (Or you just enjoy complexity.)

So.. out of frustration myself I just wrote my own calculator that focuses on the simple goal – maximum withdrawals, minimum nonsense.

Because we really just need to know how much money we want to withdraw each year and our age upon first withdrawal.

Goal: I want to withdraw $29,200 each year starting at age 54.5.
Answer: Transfer $464,391.89 into a dedicated SEPP IRA, withdraw $29,200 per year (5 total withdrawals.)

Easy. Done.

Penalty: $0
Tax: $0 (based on 2024 MFJ Standard Deduction = $29,200)

More calculation details:

How does the math work?

Generally speaking, withdrawals are largest for the fixed amortization method:
(Fixed Amortization method > Fixed Annuitization method > RMD.)

Life expectancy is a variable in each calculation, and we can choose to go solo (single life expectancy) or include a dependent (joint life expectancy.) Joint life expectancy is always greater and therefore the permitted withdrawals are smaller… so we just use the single life expectancy tables.

RMD method
IRA size: $100k
Age: 55 (Spouse age 50)

From IRS 1.401(a)(9)-9(b)
Single 31.6
Joint and Last Survivor 40.2
From IRS N-2022-06
Universal 43.6

Allowed 1st year withdrawal
Single – 100k/31.6 = $3,164.56
Joint – 100k/40.2 = $2,487.56
Universal – 100k/43.6 = $2,293.58

Note: subsequent withdrawals (year 2, 3, …) will be either higher or lower as IRA value and age change (RMD method only.)

For the Amortization and Annuitization methods a “reasonable” interest rate is used in the calculations.

This rate is the maximum of 5% or 120% of the federal mid-term rate for either of the two months immediately preceding the month in which the first payment of the SoSEPP is made (An April withdrawal can use the rate from February or March.)

Fixed Amortization method
IRA size: $100k
Age: 55 (Single life expectancy = 31.6)
Interest rate: 5%
(Planning for an April 2024 withdrawal we can use 4.97% (3/2024), 4,79% (2/2024), or 5%. Higher rates = larger withdrawals)

First we calculate the present value of an income stream (PMT = $1) over our single life expectancy to determine a sort of annuity factor.

PV = [1 – (1+r)-n] / r = [1 – (1+5%)^-31.6] / 5% = 15.7200

Annual withdrawal = IRA size / annuity factor = $100k / 15.72 = $6,361.32

Fixed Annuitization method
IRA size: $100k
Interest rate: 5% (same “reasonable” rate as Amortization method)
Age: 55

The process is much the same as with the amortization method, but now instead of looking up life expectancy in a table, we get to derive life expectancy from raw mortality data (the same data used to derive the published life expectancy tables.)

The way that works is we do a bunch of math that ain’t nobody got time or interest for.
(Although… I did the math. Annuitization results shown in the SEPP calculator.)

And what we end up with is an annuity factor similar to or smaller than that in the amortization method, so we just use that instead.

Annuitization annuity factor = 15.9091, about 1% greater (resulting in 1% smaller withdrawals from same size IRA.)

The annuitization method results in a larger annuity factor because it includes the probability of death in the years beyond the values in the single life expectancy tables, e.g. a 55 year old has a single life expectancy of 31.6 years (age 86.6 years old.) The annuitization method includes the (very small) likelihood of living up to 120 years old.

Some thoughts

Should you use an SEPP? Probably not. But maybe you have to (because all your money is in an IRA.)

Should you hire a CPA or financial advisor to figure this all out for you (because it is complicated and risky?)

You could. This guy did… he only paid 15% in fees to avoid paying 10% in penalties (had there been an error.)

If you can use a present value function in a spreadsheet you can do the necessary math in a few minutes.
(Use my SEPP calc as a reference to double check your math.)

Practicalities / Implementation

We want the largest permitted withdrawals from the smallest possible IRA, so we use the Amortization method and the Single Life Expectancy tables.

Let’s say you have a $1 million IRA, but the SEPP calculations say you only need $250k for your desired annual withdrawals.

We can ask our IRA fiduciary (e.g. Fidelity or Vanguard) to transfer $250k into its own IRA… and then use that IRA and that IRA only for our SEPPs.

This allows us to use the remainder (e.g. $750k) if we need additional flexibility for more withdrawals (another SEPP, Roth conversions, JPTP, etc…)

Each year the IRA custodian will issue a 1099R, typically as Code 1: Early distribution, no known exception. This distribution is subject to the 10% penalty (because they are not aware that an SEPP exists.)

We must then file a Form 5329 at tax time to claim the exemption from the 10% early withdrawal penalty.


You can access funds in your IRA before age 59.5 by following a few simple rules.

The penalties for making a mistake seem a bit heavy so it is important to follow them.

An SEPP is a serious commitment, so we will do it only on a fraction of our portfolio. This begins by transferring the minimum funds required into a dedicated IRA solely for our SEPP.

We use the Amortization method using the single life expectancy tables to determine the size of this IRA because it will allow the largest withdrawals / smallest IRA size.

Try out our SEPP Calculator to figure it all out.


Will you do an SEPP?