What is SEPP/72(t)? SEPP (Substantially Equal Periodic Payments), governed by IRS Rule 72(t), is a US provision that lets you withdraw from a Traditional IRA or 401(k) before age 59½ without the 10% early-withdrawal penalty, provided you take mathematically prescribed equal distributions for at least 5 years or until age 59½, whichever is longer.
Worked example: a 50-year-old with $800,000 in an IRA elects SEPP using the amortization method. At a 5% interest rate and a 35-year life expectancy, the required annual distribution is roughly $45,500. She must take exactly that amount each year, no more, no less, until age 59½ (9.5 years). Breaking the schedule triggers retroactive 10% penalties plus interest on every prior withdrawal.
SEPP is inflexible and unforgiving, which is why the Roth Conversion Ladder is usually preferred for FIRE when timelines allow. SEPP is most useful when you need income before your Roth ladder’s 5-year clock has matured, or when Roth conversions are not tax-efficient. Consult a tax professional, the rules are technical and error-prone.