Great article on the details and risks of 72t / SEPP withdrawals

An excellent but not technically easy to digest article I recently read on 72t/SEPP withdrawals from Kitces.com:

https://www.kitces.com/blog/rule-72t-sepp-calculate-payments-rmd-avoid-penalty-tax-early-ira-withdrawals-notice-2022-6/

Notice 2022‑6 quietly made 72(t) / SEPP plans more usable for early retirees by modernizing how “substantially equal periodic payments” are calculated. The IRS now allows a higher interest rate (the greater of 5% or 120% of the mid‑term rate) when you use the fixed methods, which can significantly increase the penalty‑free income a 72(t) plan can provide in those early years. The notice also updated the safe‑harbor methods and life‑expectancy tables, and clarified that you can make a one‑time switch from a fixed method to the RMD method without automatically “busting” the plan, giving planners a modest amount flexibility to adjust as circumstances change.

At the same time, 72(t) is still a strategy with a substantial amount of complexity and some risk. The calculations are somewhat technical and have individual trade-offs. The rules are rigid, and an error or later “modification” can trigger a retroactive 10% penalty on all prior distributions plus interest. Layer in the impact on taxes and long‑term retirement balances and this is not a straightfoward area.

If a 72(t) plan is on your radar, it’s a great area to slow down and work with a qualified, fee‑only advisor or tax professional who can model the tradeoffs and help you implement it correctly.