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Substantially Equal Periodic Payment - SEPP

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Dictionary Says

Definition of 'Substantially Equal Periodic Payment - SEPP'

A plan that allows individuals who have invested in an IRA or another qualified retirement plan to withdraw funds prior to the age of 59.5 and avoid income tax and early-withdrawal penalties. Typically, an individual who removes assets from a plan prior to age 59.5 will face taxes on any income generated by the fund - interest income or capital gain - and will also be subject to a 10% penalty. With substantially equal periodic payments, the funds are placed into an SEPP plan that pays the individual annual distributions for five years or until he or she turns 59.5, whichever comes last.
Investopedia Says

Investopedia explains 'Substantially Equal Periodic Payment - SEPP'

Because the IRS requires individuals to continue the SEPP program for a minimum of five years, this is not a solution for those who seek penalty-free short-term access to retirement funds. If you cancel the plan before the minimum holding period expires, you will be required to pay the IRS all the penalties that were waived on amounts taken under the program, plus interest. SEPP programs are not permitted under employee-sponsored qualified plans, such as 401(k) plans.

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  4. I will be receiving monies from a QDRO executed pursuant to my divorce. I would like to take a portion of the money as a distribution to pay for a new home. What are the tax implications of doing this?

    There are several issues to consider: The early distribution penalty - Assets distributed from a qualified plan in accordance with a qualified domestic relations order (QDRO) are exempted ...

  5. What are the "certain requirements" that must be met for substantially equal periodic payments (SEPPs)? Is it taxed at 20%? Is there any downside to the SEPP?

    For substantially equal periodic payments (SEPPs), the distributions would occur from your IRA after you rollover the assets. (SEPPs are also allowed from qualified plans after the participant ...

  6. Once substantially equal periodic payments (SEPP) of an IRA have started, is the payment fixed each year, or does it fluctuate with interest rates? Can payments be monthly?

    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 ...

  7. 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 (SEPP) must continue for five years or until you reach age 59.5, whichever ...

  8. Do I have to continue SEPPs for an inherited IRA?

    You may discontinue the payments. Once the person who is taking the substantially equal periodic payment (SEPP) dies or becomes disabled, the SEPP can be discontinued. For this purpose, disability ...

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