What is the 'Rule 72(t)'
Rule 72(t), issued by the Internal Revenue Service (IRS), permits penaltyfree withdrawals from IRA accounts, provided the owner takes at least five substantially equal periodic payments (SEPPs), with the amount depending on the owner’s life expectancy as calculated through IRSapproved methods. This rule permits IRA owners to benefit from their retirement savings before retirement age, through early withdrawal, without the otherwise required 10% penalty. The withdrawals are still taxed at the owner’s normal income tax rate.
BREAKING DOWN 'Rule 72(t)'
Rule 72(t) actually refers to code 72(t), section two, which specifies exceptions to the early withdrawal tax allowing IRA owners to withdraw funds from their retirement account before age 59.5, as long as the SEPPs regulation is met. These payments must occur over the span of five years or until the owner reaches 59.5, whichever time period is longer.Calculation for Payment Amounts
The amounts an IRA owner receives in the periodic payments enabled by rule 72(t) depend on life expectancy, which can be calculated through one of three IRSapproved methods: the amortization method; the minimum distribution, or life expectancy, method; or the annuitization method.
The amortization method determines yearly payment amounts by amortizing the balance of an IRA owner’s account over single or joint life expectancy. This method develops the largest, and most reasonable, amount an individual can remove, with the amount being fixed annually.
The minimum distribution method takes a dividing factor from the IRS’ single or joint life expectancy table, using it to divide the retirement account’s balance. This method is nearly the opposite of the amortization method; annual early withdrawal payments are likely to vary from one year to the next, though not substantially. The key difference between this method and the amortization method is the resulting payments with the minimum distribution method, as the name implies, are the lowest possible amounts that can be withdrawn.
The final IRSapproved calculation is the annuitization method, which uses an annuity factor provided by the IRS to determine equivalent or nearly equivalent payments in accordance with the SEPPs regulation. This method offers IRA owners a fixed annual payout, with the amount typically falling somewhere between the highest and lowest amount the account owner can withdraw.
Example
As an example, assume a 53yearold woman who has an IRA earning 1.5% annually, with a balance of $250,000, wishes to withdraw money early under rule 72(t). Using the amortization method, the woman would receive approximately $10,042 in yearly payments. With the minimum distribution method, she would receive around $7,962 annually over a fiveyear period. Using the annuitization method, approximately $9,976 would be her annual payment amount.

Fixed Annuitization Method
One of three methods by which early retirees of any age can access ... 
Fixed Amortization Method
One of three methods by which early retirees of any age can access ... 
Required Minimum Distribution Method
One of three methods by which early retirees of any age can access ... 
Term Certain Method
A method of calculating minimum distributions from a retirement ... 
Life Expectancy Method
A method of calculating annuity payments, by dividing the balance ... 
Annuity Factor Method
A calculation method to determine the amount of eligible withdrawals ...

Retirement
Substantially Equal Periodic Payment (SEPP): Learn The Rules
Taxpayers often make costly mistakes with SEPP programs because there is little guidance on what can be done in certain situations. 
Retirement
Should I Use My IRA to Pay Off My Credit Cards?
Cashing in an IRA to deal with outstanding credit card balances may not be the best way, but sometimes it's the best available way. Here's how. 
Retirement
How Much Are Taxes On An IRA Withdrawal?
Taxes on an IRA withdrawal depend on the type of IRA, your age, and the purpose of the withdrawal. 
Retirement
What's the Tax Hit on an IRA Withdrawal?
How much taxes you'll pay on IRA withdrawals depends on a variety of factors. Use this guide to plan ahead. 
Retirement
Tapping Retirement Funds Early – Without A Penalty
The IRS offers several ways to skirt the 10% penalty on early retirement distributions. 
Retirement
Tapping Your Retirement Accounts: How to Start
Deciding which retirement account to tap first can be confusing as it may impact how long your savings last. Here's some help. 
Retirement
When a 401(k) Hardship Withdrawal Makes Sense
If you've exhausted all other avenues, there are ways to withdraw funds before age 59½ – sometimes without the 10% penalty that's usually due. 
Retirement
How an IRA Works After Retirement
You've read a lot about saving for your future retirement with IRAs. But what happens to the account when the future is here, and you actually retire? 
Retirement
9 PenaltyFree IRA Withdrawals
If you need to take early distributions, find out which exemptions allow you to avoid expensive consequences. 
Retirement
How IRA Dividends Are Taxed
Money in an IRA isn’t taxed until retirement, but its funds receive different tax treatment once money is withdrawn.

I stopped distributions from my retirement account while under Rule 72(t). Will this ...
If an individual modifies a substantially equal periodic payment (SEPP), including discontinuing the SEPP before the end ... Read Answer >> 
I do not want to totally get out of my retirement 401(k), but I want to take 72(t) ...
The exact amount of the 72(t) distributions that you are eligible to take will be determined by your age and the IRS published ... Read Answer >> 
What are the "certain requirements" that must be met for substantially equal periodic ...
For substantially equal periodic payments (SEPPs), the distributions would occur from your IRA after you rollover the assets. ... Read Answer >> 
Once substantially equal periodic payments (SEPP) of an IRA have started, is the ...
Typically, if you withdraw assets from an IRA or a qualified retirement plan sponsored by your employer while under the age ... Read Answer >> 
How does a qualified retirement plan early distribution work?
Weigh the pros and cons of taking an early distribution from a retirement account. Most early distributions are subject to ... Read Answer >> 
Will I incur a tax penalty when making withdrawls from my IRA in excess of my SEPP?
Unfortunately, the IRA is "locked" for five years because of the requirement that the substantially equal periodic payment ... Read Answer >>