Tapping into your IRA early is a tough decision, even if you feel you have no alternative. One reason is the 10% penalty put in place to keep you from using retirement funds prematurely.

You may already know of some exceptions to the penalty, such as when you’re disabled, or are a first-time homebuyer, or when you pay for certain medical or education expenses. But what if you need the money for expenses that don’t qualify for penalty relief?

Substantially equal periodic payments may be an option. When you adhere to the detailed rules, you can take these distributions for any reason, penalty-free. (You’ll still have to pay ordinary income tax on the amount you withdraw.)

Substantially equal periodic payments, or SEPPs, are serial withdrawals from your IRA. You calculate how much to withdraw using one of three approved methods, and commit to taking a similar amount at least annually for the next five years or until you reach age 59½, whichever is the longer time period.

You can split a single IRA into separate accounts to calculate your SEPPs. Unlike required distributions, which are based on all your IRAs, you use the balance in the account you designate to calculate SEPP withdrawals.

A potential drawback: Failing to meet any part of the SEPP requirements can result in penalties and interest on all distributions, including ones from prior years.

Please call if you need to access your retirement money early. We’re here to help you sort out the tax consequences.

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