How is life expectancy determined and what interest rate is used on a 72t distribution?

When initially setting up a 72t distribution, the IRS has documented the life expectancy tables that can be used which 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 IRS.

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 IRS.gov website. If you would like help properly structuring your early retirement, please contact us today.