SEPP / Rule 72(t) (Substantially Equal Periodic Payments)
An IRS provision allowing penalty-free early withdrawals from an IRA or 401(k) by committing to a fixed schedule of substantially equal payments for at least five years or until 59½, whichever is longer.
Named for Internal Revenue Code section 72(t), SEPP lets you avoid the 10% early-withdrawal penalty on IRA or 401(k) money before 59½ if you commit to taking a calculated, 'substantially equal' amount at least once a year, using one of a few IRS-approved calculation methods (the required minimum distribution method, fixed amortization, or fixed annuitization) that produce different payment sizes from the same balance.
The catch is inflexibility: once started, the schedule has to run unmodified for the longer of five years or until you turn 59½. Changing the amount, pausing, or stopping early retroactively applies the 10% penalty — plus interest — to every withdrawal already taken under the plan, not just future ones.
That multi-year lock-in is why it's generally treated as a last resort rather than a first choice: useful for someone retiring earlier than the Rule of 55 threshold with no Roth ladder years already banked, but far less forgiving than either alternative if your circumstances or income needs change.
This definition is general information to help you understand a term, not financial, tax, or legal advice. Figures that change year to year (limits, thresholds, rates) should be confirmed against current official sources. For guidance on your situation, a licensed fee-only fiduciary is the right next step.