This calculator is designed for individuals planning for early retirement distributions. It helps calculate the Substantially Equal Periodic Payments (SEPP) under IRS Rule 72(t), which allows for penalty-free distributions from retirement accounts.
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Data Source and Methodology
All calculations are based on IRS guidelines for 72(t) distributions. Visit irs.gov for more information. All calculations rely on the data provided by this source.
The Formula Explained
\( \text{Annual Payment} = \frac{\text{Account Balance} \times \text{Interest Rate}}{\text{Annuity Factor}} \)
Glossary of Terms
| Term | Definition |
|---|---|
| Account Balance | The total amount in the retirement account. |
| Interest Rate | The applicable interest rate for calculations. |
| Annuity Factor | A factor used to calculate the payment amount. |
How It Works: A Step-by-Step Example
Example: If your account balance is $100,000, with a 5% interest rate and an annuity factor of 20, your annual payment is calculated as follows:
\( \text{Annual Payment} = \frac{100,000 \times 0.05}{20} = \$250 \)
Frequently Asked Questions (FAQ)
What is a 72(t) distribution?
A 72(t) distribution allows individuals to withdraw from their retirement accounts without penalty.
How do I calculate my SEPP?
Use this calculator to input your account balance, interest rate, and annuity factor to determine your SEPP.