What Are Substantially Equal Periodic Payments?

By | August 15, 2014

So, you’ve gotten the itch, haven’t you? Maybe it’s Belize, Rome, London? You’re looking to retire early and travel. Or maybe it’s to spend time with a family member, or to simply pursue your hobbies? Hey, it’s all good, it’s possible. We’ll talk about a variety of ways in this post.

Well, what are substantially equal periodic payments (SEPP)? They refer to a stipulation within the Internal Revenue Code called 72t. It’s a section that talks about the exceptions when pulling form your retirement account early. There are a handful of different requirements, but the basics are: the distributions must follow specific methods (1 of the 3 approved by the IRS), they must be over the course of 5 years or until you turn 59 1/2 years old (whichever is last), and you can’t stop the process once it’s begun (so you have to plan ahead and make sure you’re good to go).

Most websites online offer a 72t calculator, but that’s not the only step you need to take. It takes a little more planning to avoid the 10% withdrawal fee and meet all of the requirements. This is a huge plus, since it saves you so much money, but it’s very, very important to plan and execute it flawlessly.

Now, this is mostly a warning, because it’s not that difficult, but we do recommend you speak with a financial expert that can lead you through the entire process, especially an advisor that is very familiar with the 72t process. While it’s gotten more popular over the years, some advisors still don’t understand the ins and outs, and it’s very important to do so.

Leave a Reply

Your email address will not be published. Required fields are marked *