Close this search box.

Table of Contents

Rule 72(t)


Rule 72(t), according to the Internal Revenue Service (IRS) in the United States, is a regulation that allows for penalty-free early withdrawals from an individual retirement account (IRA), 401(k), or other types of retirement accounts under certain circumstances. This rule generally applies to those under the age of 59.5 years wanting to withdraw funds without the typical 10% penalty fee. The rule stipulates five substantially equal periodical payments over a span of five years or until the individual turns 59.5, whichever is longer.


The phonetic pronunciation of the keyword “Rule 72(t)” is “rool sev-en-tee-two tee.”

Key Takeaways

Sure, here are three main takeaways about Rule 72(t), written in HTML numbered form:“`html

  1. Rule 72(t) allows early withdrawal from retirement accounts: Rule 72(t), enforced by the Internal Revenue Service (IRS), allows individuals to take early withdrawals from their retirement accounts like 401(k) and IRA without the customary 10% penalty, under certain circumstances.
  2. SEPP (Substantially Equal Periodic Payments) program: Under Rule 72(t), one way to withdraw without penalty is by setting up a series of “substantially equal periodic payments” , also known as SEPP. The payments must be taken at least annually and must continue for five years or until the age of 59.5, whichever comes later.
  3. Penalties may apply if the rule is not followed: If any modifications are made to the SEPP program once it begins before the stipulated period ends or before the age of 59.5, whichever is longer, the 10% penalty may apply retroactively–plus interest–dating back to the first distribution received.

“`Please note that the information mentioned above largely covers the Rule 72(t), but it is a complex rule and has many other specifications and requirements too. It is always recommended to consult with a financial expert or tax advisor to fully understand the implications of Rule 72(t) and SEPPs before deciding to take early withdrawals from your retirement accounts.


Rule 72(t), part of the Internal Revenue Service (IRS) tax code, is important because it allows early retirees or those in need of income before the traditional retirement age to start withdrawing funds from their retirement accounts without incurring the 10% early withdrawal penalty. The rule allows account holders of 401(k)s, 403(b)s, and traditional IRAs to take substantially equal periodic payments (SEPPs) over a minimum of five years or until the age of 59.5, whichever is longer. Crucially, these annual withdrawals are still subject to income tax. Understanding and correctly implementing Rule 72(t) allows individuals to manage their retirement savings more flexibly and may be particularly helpful in financial planning.


The purpose of Rule 72(t), issued by the Internal Revenue Service (IRS) in the United States, is to allow early withdrawals from retirement accounts prior to the age of 59.5 without incurring a 10% penalty. This rule serves as an exception, especially beneficial to those who retire before the usual age of 59.5 and need to tap into their retirement savings for income. Under Rule 72(t), they can take substantially equal periodic payments (SEPP) and the payments must continue for five years or until the account owner reaches 59.5, whichever is longer.The rule is also used for managing the retiree’s financial burden. It based on three IRS-approved calculation methods for determining the amount of SEPP: the Required Minimum Distribution method, the Fixed Amortization method, and the Fixed Annuitization method. The choice of method impacts how much can be withdrawn each year. Essentially, Rule 72(t) offers a way for retirees to access their funds earlier, if needed, providing a greater level of financial flexibility.


1. **Early Retirement Planning** – Consider an individual who’s planning for early retirement at the age of 50 with a substantial amount in their retirement account(s). However, withdrawals from these accounts typically incur a 10% early withdrawal penalty if taken before age 59.5. To bypass this, the individual could use the Rule 72(t) to make substantially equal periodic payments (SEPP) for five years or until they reach the age of 59.5, which allows them to access their retirement funds early and without the penalty.2. **Unexpected Financial Crisis** – Suppose an individual experiences a sudden economic hardship like losing a job or a medical emergency. Even though they have enough money in their individual retirement account (IRA) or 401(k), they can’t access those funds without a penalty if they are under the age of 59.5. Using Rule 72(t), they can start making equal distributions to help alleviate the financial crisis without facing the early withdrawal penalty.3. **Career Change** – Let’s say a highly paid professional at the age of 55 wishes to shift careers to a less lucrative but more fulfilling career. This individual may not have enough funds to sustain their lifestyle for a few years before their lower-paying career can cover it. They could decide to use Rule 72(t) to withdraw funds from their retirement account without penalty, which will temporarily supplement their income during the transition between careers.

Frequently Asked Questions(FAQ)

What is Rule 72(t)?

Rule 72(t), issued by the Internal Revenue Service (IRS), allows for penalty-free withdrawals from an IRA account and other specified tax-advantaged retirement accounts before the age of 59½.

Why might someone use Rule 72(t)?

Someone might use Rule 72(t) if they retire or become financially strapped earlier than traditional retirement age and need to access funds in their retirement accounts without incurring the typical early withdrawal penalties.

How is the withdrawal amount identified in Rule 72(t)?

The withdrawal amount under Rule 72(t) is calculated based on the account holder’s life expectancy or amortization and it must be taken at least annually.

Can you stop taking withdrawals once you’ve started under Rule 72(t)?

Once you start taking withdrawals under Rule 72(t), it must be continued for at least five years or until you reach age 59½, whichever is longer.

Are Rule 72(t) distributions taxed?

Yes, although Rule 72(t) can help avoid the early withdrawal penalty, the distributed amounts are still subject to ordinary income tax.

Can Rule 72(t) be applied to all types of retirement accounts?

Rule 72(t) can be applied to most tax-advantaged retirement accounts, including 401(k)s, Roth 401(k)s, and traditional and Roth IRAs. However, it cannot be used on inherited IRAs unless the beneficiary is a spouse.

What if I make a mistake when calculating my Rule 72(t) withdrawal?

Mistakes on Rule 72(t) calculation can lead to penalties. Therefore, it’s crucial to ensure you’ve accurately calculated your withdrawal and meet all requirements. It may be beneficial to consult with a financial advisor or tax professional.

Is Rule 72(t) the only way to take early distributions from a retirement account?

No, while Rule 72(t) is a common method for taking early distributions, there are other exceptions for certain specific situations such as disability, qualified education expenses, or certain medical expenses. However, each of these situations has specific conditions that must be met.

Related Finance Terms

Sources for More Information

About Due

Due makes it easier to retire on your terms. We give you a realistic view on exactly where you’re at financially so when you retire you know how much money you’ll get each month. Get started today.

Due Fact-Checking Standards and Processes

To ensure we’re putting out the highest content standards, we sought out the help of certified financial experts and accredited individuals to verify our advice. We also rely on them for the most up to date information and data to make sure our in-depth research has the facts right, for today… Not yesterday. Our financial expert review board allows our readers to not only trust the information they are reading but to act on it as well. Most of our authors are CFP (Certified Financial Planners) or CRPC (Chartered Retirement Planning Counselor) certified and all have college degrees. Learn more about annuities, retirement advice and take the correct steps towards financial freedom and knowing exactly where you stand today. Learn everything about our top-notch financial expert reviews below… Learn More