Substantially equal periodic payments (SEPP) are a strategy you can use to avoid paying the 10% tax penalty when distributing funds from a qualified account before age 59 and a half. In this video, we discuss what SEPPs are, how they work, and how they may be able to help you save money when drawing from your investments.

Are you interested in receiving expert help in planning for your financial future?
If so, give us a call at (614)500-4121 or visit us at

🟥 I Love Roth IRAs and Roth Conversions! 🟥

🎥 Subscribe to our channel:

🤝 Join our Insider’s List:

📞 Talk with us:

#retirement #retirementplanning #investing

Disclaimer: Since we do not know your specific situation, none of this information can serve as tax, legal, financial, insurance, or financial advice, and may be outdated or inaccurate. The information comes from sources believed to be reliable but cannot be guaranteed. This content is prepared for educational purposes only. If you need advice, please contact a qualified CPA, attorney, insurance agent, financial advisor, or the appropriate professional for the subject you would like help with. Peak retirement planning, Inc. is an Ohio based registered investment adviser and able to offer advisory services in Ohio and in other states where registered or exempt from registration….(read more)

LEARN MORE ABOUT: IRA Accounts

INVESTING IN A GOLD IRA: Gold IRA Account

INVESTING IN A SILVER IRA: Silver IRA Account

REVEALED: Best Gold Backed IRA

What are Substantially Equal Periodic Payments (SEPP)?

Saving for retirement is a critical financial goal that almost everyone aims to achieve. As we reach our golden years, it’s important to have a solid plan in place to ensure a comfortable and financially stable retirement. One strategy that individuals can use to access their retirement funds without facing penalties is Substantially Equal Periodic Payments (SEPP).

SEPP, also known as 72(t) distributions, allows individuals to withdraw money from their retirement accounts before the age of 59 ½ without incurring the standard 10% early withdrawal penalty. This option is available to those who have set up a traditional Individual retirement account (IRA) or a qualified employer-sponsored retirement plan, such as a 401(k) or 403(b).

To qualify for SEPP, individuals must commit to withdrawing a substantially equal amount of money each year for a minimum of five years, or until they reach the age of 59 ½, whichever is longer. These periodic payments are based on one of three IRS-approved methods:

1. Required Minimum Distribution (RMD) Method: This method divides your retirement account balance by your life expectancy, as determined by IRS life expectancy tables. The calculated amount must be withdrawn each year.

2. Amortization Method: This method allows you to use an amortization formula to calculate the annual distribution amount. This formula takes into account your retirement account balance, your age, and an interest rate derived from long-term corporate bond rates.

3. Annuitization Method: This method calculates your annual payouts based on IRS-published annuity factors and your retirement account balance. The annuity factor is determined by your age.

It’s important to consider the potential drawbacks and implications of opting for SEPP. While avoiding the early withdrawal penalty may be attractive, it’s crucial to remember that these distributions are subject to regular income tax. Additionally, once a SEPP plan is set in motion, it cannot be altered or stopped without facing steep penalties and retroactive application of the 10% early withdrawal penalty.

Before deciding to take SEPP distributions, it’s recommended that individuals consult with a financial advisor or tax professional to fully understand the potential impact on their overall financial plan. They can help determine if SEPP is the right choice and guide you through the complex rules and regulations associated with this strategy.

In conclusion, Substantially Equal Periodic Payments (SEPP) serve as a useful tool for accessing retirement funds before the age of 59 ½ without incurring penalties. By committing to withdraw a substantially equal amount over a specified period of time, individuals can make early withdrawals while potentially avoiding the hefty 10% early withdrawal penalty. However, due diligence is essential, as SEPP comes with strict rules and regulations that require careful planning and consideration before implementation.