PSA: we tested the top 6 “72(t) calculator” results on Google. All of them fail the IRS’s own reference examples.

If you’re planning early retirement with a 72(t) SEPP distribution, you need accurate calculations.

We researched the topic and discovered that every popular calculator we tested produces incorrect results when compared to the IRS’s own published examples.

The IRS Reference Example:

• 50 years old, single life expectancy, 4% rate
• IRS Source ⁽¹⁾

What we found testing the top page Google results:

1. Bankrate – All three methods are off (2.92%, 5.416% and 5.377% instead of: 2.76%, 5.275% and 5.507%)
2. CalcXML – Annuitization: 5.22% (should be 5.51%)
3. MOAA – Annuitization: 5.22% (should be 5.51%)
4. Fidelity/SS&C – Annuitization: 5.22% (should be 5.51%)
5. Voya – Does not allow to enter the 4% acceptable rate only allows 0%. for that Annuitization seems a bit off (2.8808% vs 2.799%)
6. National Life – Annuitization: 5.22% (should be 5.51%)
   

Why this matters: 72(t) is one of the few ways to access retirement accounts before 59½ without the 10% penalty. Getting the calculation wrong means either:

• Distributing too much (potential issues with IRS, perhaps you’ll need a favorable private letter ruling if audited?)
• Distributing too little (leaving money locked up unnecessarily and potential minor IRS issues)

We built a 72(t) So-SEPP calculator and pre-loaded it with the matched IRS example inputs so you can check the results yourself.

⁽¹⁾↩ Back – IRS reference examples:

Inputs:

• Age 50 in first year of distribution (2023)
• 4% rate chosen for fixed amortization and fixed annuitization methods
• Using RMD single life expectancy table

Reference Outputs:

• for the RMD method:
  • the first year withdrawal rate is 2.7624% (1 / 36.2)
  • the second year withdrawal rate is 2.8329% (1 / 35.3)
• for the amortization method:
  • the first year withdrawal rate is 5.2754% ( 1 / 18.9559) where 18.9559 is the computed amortization factor.
• for the annuitization method:
  • the first year withdrawal rate is 5.5076% ( 1 / 18.1568) where 18.1568 is the computed annuity factor.

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Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Consult with a qualified financial advisor for personalized guidance.