How much can I take before 59½ without the 10% penalty?

Section 72(t) waives the 10% early-withdrawal penalty on an IRA, or on a 401(k) after you leave the job, if you take “substantially equal periodic payments” sized by one of three IRS methods: required minimum distribution, fixed amortization or fixed annuitization. The payments are worked out as if spread over your life expectancy, but you only have to keep them going for five years or until 59½, whichever is longer. Each payment is still ordinary income.

The IRS treats it as a “modification.” If it happens before the plan ends, the 10% penalty applies retroactively to every payment you took before 59½, plus interest. Taking more or less than the schedule and adding money to the account both count. Moving money to another plan is less clear-cut: Notice 2022-6 treats a transfer of part of the account or a rollover of a payment as a modification, while §72(t)(4)(C), added by SECURE 2.0 for transfers after 2023, says a transfer or rollover to another qualified plan is not one if the combined payments would still qualify. Three changes are safe: a one-time switch from fixed amortization to the RMD method, payments that stop because the account runs out of money, and death or disability.

For payments that start in 2023 or later (2022 is optional), Notice 2022-6 allows any rate up to the greater of 5% or 120% of the federal mid-term rate for either of the two months before the month of your first payment. In 2026 that figure is 5.23% for August, 5.40% for September and 5.54% for October (the mid-term 120% row, annual column, of Table 1 in Rev. Rul. 2026-13, 2026-17 and 2026-19), so a first payment in October 2026 could use up to 5.40% and one in November up to 5.54%. The IRS publishes a new figure every month, and a lower rate gives a smaller payment. This page lets you enter the ceiling and any rate up to it.

No. It only removes the 10% penalty: every payment from a traditional IRA or pre-tax 401(k) is ordinary income in the year you take it, and your state may tax it too. It is not the only way in. A Roth conversion ladder is another common way to reach pre-tax money before 59½; it has no payment schedule to keep, but each conversion waits five years. For a 401(k) only, the “rule of 55” waives the penalty on the plan of an employer you left in or after the year you turned 55. The rule of 55 does not apply to IRAs, so rolling that 401(k) into an IRA to start a SEPP gives it up.

The payment is proportional to the balance under the plan, so a smaller balance means a smaller payment. At the highest rate allowed the payment is a bigger share of the balance than the 4% rule of thumb (about 6.1% at age 45), and it has to be paid every year until the plan ends whatever markets do, so the maximum is a ceiling set by the rules, not a spending plan. Some people move the money they need into a separate IRA before the first payment and start the plan on that account alone. Whether that suits a particular person is a question for a tax professional, because once payments start, adding money to the account or moving part of it out breaks the plan.

Calculators differ in three choices: the life expectancy table, the method and the interest rate. This page uses the 2022 Single Life Table, which gives the largest payment, shows the rate it used, and lists the payments side by side. Tables used before 2022 give different numbers, so an older calculator can disagree, and one that stops at 5% shows a smaller maximum than the rules allow in a month when 120% of the mid-term rate is higher.