How Much Can You Take Out With a 72(t)? $500,000 at 40, 45, 50 and 55

The question behind most searches for a 72(t) is a plain one: how much money would it let me take out each year, and for how long am I stuck with it? The answer depends on three things the IRS lets you choose or fixes for you: the method (there are three), the number of years the life expectancy table gives for your age, and, for the two fixed methods, an interest rate. This guide runs a $500,000 IRA through all of it at four starting ages, using the same engine as the 72(t) SEPP calculator, which reproduces the IRS's own worked example to the dollar. If you want the rules in plain English first, the 72(t) explainer covers them.

What $500,000 pays in the first year, by the age you start

The assumptions are the ones that make the comparison clean: a first payment on your birthday, so the table age is your exact age, and one payment a year on each anniversary, with what is left growing in between; the Single Life Table for the RMD and fixed amortization methods; an interest rate of 5%, which any start can use because the ceiling is the greater of 5% and 120% of the federal mid-term rate; and one pre-tax IRA. The RMD method divides the balance by the table number every year. Fixed amortization pays off the balance in level amounts over that many years at the interest rate. Fixed annuitization divides the balance by the value today of $1 a year for as long as you live, from the mortality rates in the regulation.

Two things stand out. The fixed methods pay roughly two to two and a half times what the RMD method pays at the start, because they are sized to use up the balance over your whole life expectancy at 5% growth, while the RMD method takes only the table's reciprocal each year and leaves the rest to grow. And the amount rises only slowly with age: $28,013 at 40 against $31,807 at 55, since a start 15 years later shortens the table from 45.7 to 31.6 years but leaves the interest rate to do much of the work. The IRS's own example (a $400,000 IRA at 50, a 4% rate) is $11,050, $21,102 and $22,030 for the three methods; the calculator matches all three.

How long you are committed, and what you must take

The payments cannot change until the later of five years after the first payment and your 59½th birthday (Notice 2022-6; the IRS's FAQ question 13 works two dates through). Starting young is the expensive part: a start at 40 is 19.5 years of payments.

“Yearly payments” counts one a year on each anniversary of the first, up to the day before the commitment ends. The last column is 10% of the payments if the money is pre-tax: what the exception saves, not a tax-free withdrawal, since ordinary income tax still applies to every dollar. If the series is broken the bill is of the same kind: the 10% on that year's distributions plus the 10% on every earlier payment, with interest (IRS question 9).

What is left at 59½ depends on the return, not the rate you pick

The interest rate sets the payment; the account's actual return decides what is left. The table shows the balance in the account right after the last required fixed-amortization payment, for four steady yearly returns (it leaves out the few months of growth before the commitment ends, so the true figure is a little higher).

Only the youngest start is in danger on a steady return: at 40 with no growth, $28,013 a year lasts 17.8 years, short of the 20 the commitment needs, while at 45 the money lasts 17.3 years against 15. (If the money runs out, the IRS does not treat the last, smaller payment as a modification, but the income stops.) The risk that matters more is the order of returns, because a fixed amount is the same dollars whatever the balance.

A bad first year

Suppose the account falls 30% in the year after the first payment and earns 5% a year after that. The second payment falls due on the smaller balance, and the fixed payment does not change. The RMD method would have used the new, smaller balance, and the IRS allows exactly one change: from a fixed method to the RMD method, once, in any later year without it counting as a modification (Notice 2022-6, section 3.03(b)). The table switches at the second payment, the first one taken from the smaller balance.

A fixed payment sized at about 5.8% of the starting balance is 8.5% to 9.7% of what is left after the loss, and the 59½ date does not move. For the start at 40 the money is gone in year 18, before the 20-year commitment ends. The switch has a price: the payment drops to a little over a quarter of what it was (from $28,911 to $8,244 for the start at 45), because the RMD method divides the smaller balance by 40.0 years. If the income was the point, that is the real cost of the escape hatch. The same table shows why a start at 55 is the least exposed: the commitment is five years, so there is less time for the account to fall far behind the payments.

The balance you need for $40,000 a year

Turn the first table around. The balance on the day you start that gives $40,000 in the first year, before income tax:

The RMD column is the table number times $40,000; for a fixed method the balance is about $16,580 per $1,000 of yearly income at 50. Remember the RMD method's amount changes every year, up if the account grows and as the table shortens, down if it falls, so $40,000 is only the first year.

What the interest rate is worth

The two fixed methods take a rate up to the greater of 5% and 120% of the federal mid-term rate for either of the two months before your first payment (Notice 2022-6, section 3.02(c)). For a start at 50 the fixed amortization amount on $500,000 is:

• 3%: $22,831 a year
• 4%: $26,377 a year
• 5%: $30,156 a year
• 5.54%: $32,285 a year (the highest figure in Rev. Rul. 2026-19 for October 2026, annual compounding column; available to a first payment in November or December 2026, our reading of which column applies)

The difference between 3% and 5% is $7,325 a year, the same account, the same commitment. A higher rate is a bigger payment drawn from the same pot, so it only buys more income now at the cost of a faster draw down; it does not make the account earn more. The IRS leaves the choice to you, within the cap.

What to settle before the first payment

• One account, one series. The balance of one IRA or plan account sets the amount; several accounts cannot be added together, and each series is managed separately. An employer plan needs you to have left that employer first.
• No additions, transfers or rollovers after the balance date, and no extra withdrawals: additions, transfers and rollovers are modifications under Notice 2022-6, section 3.02(e), and so is taking more or less than the method gives (IRS FAQ question 9).
• The balance date for a fixed method may be any day from December 31 before the first payment to the first payment (section 3.02(d)); the choice moves the amount by whatever the account did in between.
• Installments are fine: the year's amount may be taken monthly or quarterly, as long as each year's total is right.
• Income tax still applies to pre-tax money; the exception waives only the 10% additional tax.

Not modelled here: a joint annuity factor, several beneficiaries, rates for months before August 2026, and anything about state tax or Roth money. The calculator takes your own balance, dates and rate, and shows the end date the commitment reaches.