Typically, if you withdraw assets from an IRA or a qualified retirement plan sponsored by your employer while under the age of 59.5, you may owe ordinary income tax on these amounts, plus an additional 10% early-withdrawal penalty. However, you can avoid the early-withdrawal penalty by taking assets under a substantially equal periodic payment (SEPP) program. (For an in-depth look at SEPPs, we encourage you to read Rules Regarding Substantially Equal Periodic Payment (SEPP).)
The IRS provides three methods to calculate SEPPs. As the three methods result in different calculated amounts, you can choose the one that better suits your financial need. However, with both the amortization and annuitization methods, the interest rates and payments are determined when the calculation is performed and they do not change. According to revenue ruling 2002-62, the amounts are not recalculated/redetermined; therefore, there is no opportunity to change the interest rate.
However, if you check out Bill Stecker's May 12, 2004, article "New Private Letter Ruling On Substantially Equal Periodic Payments" (posted on the website 72t on the Net), it seems that the IRS has responded in a private letter ruling (PLR) for one of his clients allowing a recalculation of the amortization method, with the interest rate changing each year but remaining consistent with the time of year. In other words, the interest rate is determined by the time of year at which the rate is recalculated. As Stecker correctly notes, a PLR applies only to the individual to whom it was issued, but it gives a good sense of how the IRS might respond to cases with similar facts and circumstances.
Stecker and Gordon Weis are the kings of 72(t)s (Weis operates the www.72t.net board). You could post your message on their forum and see what they say (Stecker posts under the name "The Badger" and Weis posts as GFW).
As for the frequency of payments, they can be made monthly, quarterly or at another frequency, as long as the required amount for the year is withdrawn by the end of the year.
(To learn more, read Tax Treatment Of Roth IRA Distributions and Selecting The Payout On Your Annuity.)
This question was answered by Denise Appleby