72(t) SEPP Maximum Interest Rate

Name: 72(t) SEPP Maximum Interest Rate — Current Month
Creator: FinanceWonk
License: https://creativecommons.org/licenses/by/4.0/
Keywords: 72t interest rate, SEPP rate, 120% mid-term AFR, substantially equal periodic payments, rule of 55 alternative

The current maximum 72(t) interest rate (greater of 5% or 120% of the mid-term AFR), the three SEPP calculation methods, and worked payment examples

Last Updated: June 2026

Key Numbers

Max Rate (Jun 2026)

5.00%

Rule

Greater of 5% or 120% Mid-Term

Duration

Longer of 5 Yrs / Age 59½

Bust Penalty

Retroactive 10% + Interest

Maximum SEPP rate — series beginning June 2026

5.00%

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 payments begin — and right now the AFR candidates (May 2026: ~4.90%, April 2026: ~4.58%) both sit below 5%, so the statutory floor governs.

A 72(t) plan — substantially equal periodic payments — is the main lawful route to penalty-free retirement-account withdrawals before 59½ without separating from an employer at 55+. The interest rate is the single biggest lever on the payment a fixed-method plan produces: before Notice 2022-6 added the 5% floor in 2022, SEPP payers were stuck with 120% of mid-term AFR alone (for context, the current month’s published 120% mid-term is 4.97% — see the AFR reference page).

A busted 72(t) plan is retroactively expensive.

One wrong withdrawal unwinds years of penalty protection. Before you lock a five-plus-year commitment, have a fiduciary stress-test the method, the rate, and the account split. WiserAdvisor matches you with up to three vetted advisors, free, in about 5 minutes.

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The Three Calculation Methods

Comparison of the three 72(t) SEPP calculation methods
Method	Formula	Payment behavior	Relative size
Required minimum distribution	Balance ÷ life expectancy factor	Recalculated every year — moves with the market and your age	Smallest
Fixed amortization	Level payment amortizing the balance over life expectancy at the chosen rate	Fixed dollar amount for the life of the plan	Largest
Fixed annuitization	Balance ÷ annuity factor (Notice 2022-6 Appendix B mortality table + chosen rate)	Fixed dollar amount for the life of the plan	Close to amortization

Life expectancy can come from the Single Life Table, the Uniform Lifetime Table, or the Joint Life Table with your beneficiary. Single life gives the shortest period and therefore the largest payment — the usual choice when the goal is maximizing income.

Worked Example — $500,000 IRA at Age 55

Inputs: $500,000 IRA, owner age 55 (Single Life factor 31.6), maximum rate 5.00%.

Annual 72(t) payment under each method for a $500,000 IRA at age 55 using the current maximum rate
Method	Calculation	Annual payment	% of balance
RMD method (year 1)	$500,000 ÷ 31.6	$15,823	3.2%
Fixed amortization	Level payment, 31.6 yrs @ 5.00%	≈ $31,807	6.4%
Fixed annuitization	$500,000 ÷ annuity factor (Notice 2022-6 App. B)	Slightly below amortization	≈ 6%

The spread is the whole decision: the amortization method pulls roughly twice the income of the RMD method from the same account. If you need less than the fixed-method payment, a common technique is to split the IRA and run the SEPP on only the slice sized to produce the income you actually need — the untouched IRA stays flexible.

Commitment, Modification, and the Penalty

Duration: payments must continue for the longer of 5 full years or until age 59½. Start at 55 → committed to 60. Start at 58 → committed to 63.
No tampering with the account: no additional withdrawals, no contributions, and no rollovers in or out of the SEPP account while the series runs.
One sanctioned change: a one-time, irrevocable switch from either fixed method to the RMD method (carried forward from Rev. Rul. 2002-62 into Notice 2022-6) — the escape hatch when a bear market makes the fixed payment unsustainable.
Per-account, not per-person: each IRA can run its own SEPP; busting one plan doesn’t bust the others.

The modification penalty is retroactive. Break the series — miss a payment, take an extra dollar, roll the account over — and the 10% additional tax applies to every distribution taken before age 59½ since the plan began, plus interest, all due in the year of the modification. A plan started at 55 and busted at 59 can owe four years of recaptured penalties at once.

Check the rule of 55 first. If you separate from your employer in or after the year you turn 55, that employer’s 401(k)/403(b) allows penalty-free withdrawals with none of the SEPP rigidity. 72(t) is the tool for IRAs and for retirements earlier than 55.

Retiring before 59½ takes more than one rule.

72(t) is one tool next to the rule of 55, Roth contribution basis, and taxable bridges. An advisor can sequence all four so the SEPP carries only the load it must. WiserAdvisor connects you with up to three local fiduciaries, free, in about 5 minutes.

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72(t) Questions

What is the maximum 72(t) interest rate right now?

5.00% for SEPP series beginning in June 2026. Notice 2022-6 allows the greater of 5% or 120% of the federal mid-term rate for either of the two months before payments begin. The candidate AFR-based rates (about 4.90% for May and 4.58% for April 2026) are both below 5%, so the statutory 5% floor governs this month.

What are the three 72(t) calculation methods?

The RMD method (balance ÷ life expectancy factor, recalculated annually — smallest and variable payment), the fixed amortization method (level payment amortizing the balance over life expectancy at the chosen rate — largest payment), and the fixed annuitization method (balance ÷ an annuity factor from the Notice 2022-6 mortality table — close to amortization). Fixed methods lock the dollar amount for the life of the plan.

How much could I withdraw from a $500,000 IRA at age 55?

Using the June 2026 maximum 5% rate and the age-55 single life factor of 31.6: the fixed amortization method produces about $31,800 per year, while the RMD method produces $15,823 in year one (recalculated annually). The annuitization method lands near the amortization figure. That is the realistic range — roughly 3.2% to 6.4% of the balance.

How long do 72(t) payments have to continue?

The longer of five full years or until you reach age 59½. Start at 55 and you are committed to age 60; start at 58 and you are committed to 63. No stopping, no extra withdrawals, no rollovers into or out of the account during the series.

What happens if I break (modify) a SEPP series?

The 10% early-distribution tax is applied retroactively to every pre-59½ payment ever taken under the plan, plus interest — potentially years of penalties at once. The one sanctioned change: Notice 2022-6 permits a one-time irrevocable switch from a fixed method to the RMD method, which lowers payments without busting the plan.

Sources

This content is for educational and informational purposes only and does not constitute financial, tax, or legal advice. Consult a qualified professional for guidance tailored to your situation.