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I would like to take 72(t) payments from my 401(k) plan, but I have received conflicting information.......

Last Updated April 2, 2009


I would like to take 72(t) payments from my 401(k) plan, but I have received conflicting information as to whether this can be done from a retirement account that is not an IRA.  What is the right answer?


72(t payments – also referred to as Substantially Equal Periodic Payments (SEPP) can be taken from IRAs, qualified plans-including 401(k) plans, and 403(b) accounts. However, while 72(t) payments can be taken from IRAs at anytime, they can be taken from qualified plans and 403(b) accounts only after the participant has separated from service with the employer that sponsored the plan. Therefore, if you are still employed by the company that sponsored your 401(k) plan, you cannot take 72(t) payments from that account.  But, it you are no longer employed by that company, then you may be able to take 72(t) payments from the account.

You may want to consider the following:

  • If you  separate from service ( stopped working for an employer) in the year your reach age 55 or later, distributions from that employer’s 401(k) plan would be not be subject to the early distribution penalty. Therefore, there would be no need to take  72(t) payments from the account
  • If you separate from service with the employer, they may not allow you to make 72(t) payments from the account, and may instead require that you distribute your entire balance. In such a case, it may make sense to rollover the balance to an IRA and take 72(t) payments from the IRA.
  • Your retirement account balance may produce 72(t) payments that are higher than what you need. If that is the case, consider moving only the amount needed to produce the payments (you need) to a separate account. To determine the amount you will need to move to the new account, perform a ‘reverse 72(t) calculation’. provides a calculator for a ‘reverse 72(t) calculation’.
  • Be sure to work with a financial/tax professional, who will not only assist you with performing the calculation, but will also help you to determine if a 72(t) schedule is right for you, and ensure that you take the steps necessary to ensure you do not run afoul of the 72(t) rules.

For some general information on 72(t) payments, see the article Substantially Equal Periodic Payments (A Doorway to Penalty Free Distributions):