How are 72(t) distributions calculated by using the IRS 72(t) rule?

There are 3 IRS standard methods on how 72(t) distributions are calculated:

  • Amortization Method
  • Annuitization Method
  • Required Minimum Distribution Method

With all three methods, you must maintain the same frequency of payments until age 59 1/2 or for a period of 5 years if the distributions are started after age 54 1/2. The Amortization Method provides the most amount of annual income, however the Annuitization Method generates a very similar amount. With both of these methods, a life expectancy factor and specified interest rate are used in determining the amount of income available. The dollar amount distributed must remain the same over the 5+ year period and is based on the original balance of the account at the start of the 72t.

The Required Minimum Distribution method is simply based on a life expectancy factor and generates a considerably lower amount of annual income, but will change every year based on the previous year end value of the account. Also, you can submit a request through a private letter ruling to use your own calculation different than the three discussed, however it is highly scrutinized on a case by case basis and not recommended.

How is Life Expectancy determined and what interest rate is used?

The life expectancy tables that can be used are:

  • The Uniform Life Table
  • The Single Life Table
  • The Joint Life and Last Survivor Table

The most common table used is the Uniform Life Table, and all three tables can be found on The Internal Revenue Service website at

The maximum 72(t) interest rate that can be used is the greater of 120% of the Federal mid-term annual rates for either of the two months immediately preceding the month in which the distribution begins.

Please note this is NOT the interest rate to expect on the actual investment that the 72(t) distribution is coming from. It is simply used to calculate the allowed amount that you can take. Current rates can also be found on website.