Can I model 72t (SEPP) Distributions?

72(t) SEPP distributions refer to Substantially Equal Periodic Payments taken under IRS code 72(t)(2)(A)(iv), a rule that allows you to withdraw money from an IRA or ERA (Employer Retirement Account) prior to age 59½ without the typical 10% early withdrawal penalty.

You can read more about the rule here.

Model 72(t) Distributions in ProjectionLab

If you have accounts such as an IRA or 401(k) in your ProjectionLab account, you can click on one of your accounts to view the different options. 72(t) Distributions (SEPP) will automatically be set to Off or None.

Distribution Options

If you would like to turn these distributions on, you’ll have a few options available to choose from a dropdown:

• None: No 72(t) distributions will be modeled for this account.
• RMD Method: Calculate distributions using IRS life expectancy tables.
• Fixed Amortization: Calculate distributions using a fixed amortization schedule.
• Custom Amount: Specify a custom distribution amount each year.

When you pick any option aside from None, you will choose a start date that will automatically set to your retirement milestone. For Fixed Amortization you will need to add an interest rate, and for Custom Amount you will need to add a dollar amount. Below the inputs you will see a comparison table of 72(t) disabled, RMD Method, and Amortization Method with ten metrics including lifetime taxes, legacy, estate drag, and more.