In 2002 the IRS issued a ruling that allows early distributions from retirement accounts without being penalized if those distributions are part of a series of substantially equal periodic payments (SEPP).

The payments are annual and must continue for 5 years or until the age of 59 1/2 is attained, whichever is the longer period. See Rev. Rul. 2002-62 on the www.treasury.gov web site.

These distributions are calculated base on three methods,

1. Required minimum distribution method,
2. Fixed amortization method, and the
3. Fixed annuitization method.
Methods 1 and 2 utilize Life Expectancy Tables and method 3 utilizes a mortality table.
Methods 2 and 3 result in a fixed yearly distribution while method 1 results in a distribution that varies from year to year.