72(t) SEPP Rules 2026: Payout per $100,000 and the Rate Ceiling

What the IRS says the ceiling and the methods are

Everything here comes from the Internal Revenue Code, Notice 2022-6 and the IRS page on substantially equal periodic payments (last reviewed July 23, 2026). Notice 2022-6 applies to “any series of payments commencing on or after January 1, 2023” and supersedes Revenue Ruling 2002-62 (“Rev. Rul. 2002-62 and Notice 2004-15 are modified and superseded”). The IRS calls the series a SoSEPP; the owner of an IRA is treated as the employee.

Source: 26 U.S.C. 72 (Cornell Legal Information Institute, read October 20, 2026); Notice 2022-6; IRS, “Substantially equal periodic payments” (page last reviewed July 23, 2026).

On the premise that the cap is 5%. Some summaries state the cap as 5% only, or as a number that ignores the floor. The Notice text is the greater of the two. The IRS FAQ phrases the month rule as “the month in which the first payment of the SoSEPP is made”, the Notice as the month “in which the distribution begins”; we treat them as the same date. The Notice does not say which compounding column of the revenue ruling to use; we use the annual column, which gives 5.40%, 5.54% and 6.11% (our reading). Rates below the ceiling are allowed (“any interest rate that is not more than”), and a lower rate gives a lower payment.

Source: Revenue Rulings 2026-17, 2026-19 and 2026-21, Table 1. The last column is our reading of Notice 2022-6 section 3.02(c). The December 2026 ruling is not out yet, so a January 2027 start can use only October or November until it is.

Payout per $100,000 of IRA balance, ages 45 to 58

These are first-year amounts, our arithmetic on the Single Life Table (26 CFR 1.401(a)(9)-9(b)), the Uniform Lifetime Table (Appendix A of the Notice) and the Table 4 mortality rates (26 CFR 1.401(a)(9)-9(e)). Amortization is a level payment at the end of each year over the table years; annuitization divides by the present value of $1 paid at the end of each year the owner is alive. That is the convention in the IRS FAQ example, and our code matches its factors (18.9559 and 18.1568 for a 50-year-old at 4.0%) and its RMD result ($400,000 divided by 36.2 is $11,050). Age is the age on the birthday in the first payment year. Multiply by your balance and divide by 100,000; the table is not a substitute for the calculation your custodian or tax adviser must document.

Source: computed from Notice 2022-6 sections 3.01 and 3.02 and Appendix A, 26 CFR 1.401(a)(9)-9(b) and (e), and Rev. Rul. 2026-19 (October 2026, 120% of mid-term AFR 5.54%). The RMD amount changes every year; the other two are fixed.

The ceiling moves the fixed methods a lot, and not the RMD method at all. If the first payment is made in December 2026 or January 2027, the November rate (6.11%) is available:

Source: computed as above, with Rev. Rul. 2026-21 (November 2026, 120% of mid-term AFR 6.11%).

How far the chosen rate matters, at age 50 with the Single Life Table (our arithmetic):

Source: computed from Notice 2022-6; the 5.54% and 6.11% rows are the October and November 2026 ceilings.

Which table is the biggest decision. At 50 the Single Life Table gives 36.2 years and the Uniform Lifetime Table 48.5; the longer period means a smaller payment, $2,062 against $2,762 under the RMD method (our arithmetic). The Notice allows either, and a joint table with a designated beneficiary too, but once chosen the RMD table must be kept (section 3.02(a)).

How long a series lasts

The statute sets two clocks and the later one controls: five years from “the date of the first payment”, or age 59 1/2. The IRS FAQ gives the date arithmetic: a taxpayer who starts on December 1, 2024 at age 56 may not take another distribution or change the amount until December 1, 2029, “five full years after the date the SoSEPP commences”, even though age 59 1/2 comes on February 15, 2028. A taxpayer who starts at 52 is held to age 59 1/2 instead.

Source: 26 U.S.C. 72(t)(4)(A) and IRS FAQ Q&A 13; years computed assuming the first payment is made on the birthday.

The modification trap: what breaks a series

Section 72(t)(4)(A) increases the tax “for the 1st taxable year in which such modification occurs” by “the tax which (but for paragraph (2)(A)(iv)) would have been imposed, plus interest for the deferral period”. The IRS FAQ puts it in two parts: the 10% additional tax on all distributions in the year of the modification, and a recapture tax equal to the 10% for the prior years of the series, plus interest. After a modification the owner is not obliged to keep taking the old amount and may start a new series later.

Source: Notice 2022-6, IRS FAQ on substantially equal periodic payments (page last reviewed July 23, 2026) and 26 U.S.C. 72(t)(4). Rows marked “our reading” are not stated in the IRS text. Death and disability are carved out of the modification rule by statute.

When the IRA cannot fund the payment

The trap for an IRA of non-traded REIT or BDC shares, a private note or a self-directed real estate holding is that the payment is a dollar amount fixed for years and the account must be able to pay it in cash. Worked example (our arithmetic, assumed facts): a 52-year-old with a $500,000 IRA, $150,000 of it cash and $350,000 in illiquid holdings, using the Single Life Table (34.3 years) and the October 2026 ceiling of 5.54%.

Three consequences follow from the text, not from any one fund.

• A short payment is a modification. The IRS FAQ treats an annual amount “either lesser or greater” than the original as a modification. The depletion rule protects only the case where the account is exhausted.
• Outside cash is an addition. Topping up the IRA from a bank account so it can pay is “any addition to the account balance other than by reason of investment experience”, which Notice 2022-6 lists as a modification.
• Selling inside the IRA is not the problem; speed is. If the illiquid holding can be sold or tendered inside the IRA and the cash stays there, nothing in the sources we read treats that as a distribution (our reading). The risk is a repurchase program that is paused, prorated or capped when the payment comes due; our guide to required minimum distributions from illiquid IRA assets describes the same cash problem for age 73 and later. The RMD method has the same cash need, but the amount falls if the balance falls.

Splitting the IRA before the first payment is the one structure the sources support: “If the taxpayer has more than one account, the taxpayer may establish a separate SoSEPP from each account”, so a liquid IRA can carry the series and the illiquid one stays outside it. Moving money between the two after the first payment is a transfer of a portion of the balance (our reading of section 3.02(e)(2)). Whether the split is possible depends on the custodian and the assets.

The Roth conversion ladder: a different clock

A conversion ladder does not use the 72(t)(2)(A)(iv) exception. Each year the owner converts an amount from the traditional IRA to a Roth IRA, pays ordinary income tax on it in that year, and later withdraws the converted amount. Three texts matter, all in 26 U.S.C. 408A:

• The conversion itself: “there shall be included in gross income any amount which would be includible were it not part of a qualified rollover contribution” and “section 72(t) shall not apply” (408A(d)(3)(A)).
• The withdrawal of a conversion: if a distribution from a Roth IRA is allocable to a conversion and “is made within the 5-taxable year period beginning with the taxable year in which such contribution was made”, section 72(t) applies as if that portion were includible in gross income (408A(d)(3)(F)), and only to the extent the conversion was taxable.
• The order: after regular contributions, conversions come out “on a first-in, first-out basis” (408A(d)(4)(B)(ii)(II)).

Source: 26 U.S.C. 408A(d)(3)(F)(i); years computed. The period starts with the taxable year of the conversion, not the date. Taxable-year counting is in the statute; the age 59 1/2 and other exceptions in 72(t)(2) are separate.

Source: 26 U.S.C. 72(t) and 408A; Notice 2022-6; our reading for the last two rows.

The conversion side is covered in our Roth conversion guide for IRAs with illiquid assets, including the value to report and why the tax belongs outside the IRA. A large conversion also raises the income the Medicare surcharge reads two years later, covered in our IRMAA brackets and Roth conversion page, and the pro-rata rule that taxes a conversion across all traditional IRAs is described in our backdoor Roth and pro-rata guide. For a 401(k) holder who separates from service in or after the year of age 55, section 72(t)(2)(A)(v) is a different exception and our net unrealized appreciation guide shows how the 10% reads on company stock.

What to settle before the first payment

• Which account. The series is per account. List the cash in the account and the repurchase terms of each illiquid holding in it before the balance date.
• Which number. The balance date, the table, the method and the rate must be documented; the Notice allows a reasonable-manner balance date window, not a guess.
• Where the cash comes from. A series that needs outside cash, or a repurchase that may be paused, is the case to put to a tax professional first.
• The alternative clock. Compare the series with converting in stages, which has no payment to miss but a tax bill each year.

What a reader can do with this

• Run the table before you run a calculator. Take your age, your balance and the three methods above, and compare with the custodian's figure. A gap of more than a few dollars per $100,000 usually means a different table, rate or payment-timing convention.
• Put the rate month on paper. The ceiling depends on the month of the first payment: 5.54% for November 2026, 6.11% for December 2026 (our reading).
• List the cash. For each illiquid holding in the account, write down what the sponsor's own documents say about repurchases, and how many payments of cash the account holds.
• Keep the paper. The balance date and value, the method, the table, the rate and the revenue ruling month are the file your tax professional needs for any later question.

FAQ

Sources, read and saved on October 20, 2026: 26 U.S.C. 72 and 408A (Cornell Legal Information Institute); IRS Notice 2022-6; IRS, “Substantially equal periodic payments” (page last reviewed July 23, 2026); Revenue Rulings 2002-62, 2026-17, 2026-19 and 2026-21; 26 CFR 1.401(a)(9)-9 (eCFR) and the IRS applicable federal rates page. The payout tables, the 8-payment example and the conversion dates are our arithmetic from those documents; the account, ages and balances in the worked example are assumptions. This is analysis of public documents, not investment, legal or tax advice.