Historical 120% of Federal Mid Term Rate

Percent Growing

The following data is the current and historical 120% of Federal Mid Term Rate.  As time permits, I will go back further in time.

Why is this rate important?  As it pertains to early retirement, this is the rate used in some calculations for Reg 72(t) for an early retiree to be able to take penalty free withdrawals from their IRA prior to reaching age 59.5.  Technically, 72(t)/SEPP (substantially equal periodic payments) uses a reasonable interest rate, which is defined by the IRS as not more than the 120% Federal Mid Term Rate for either of the 2 months prior to the first distribution.

If you do not understand the rules for setting up your 72(t) calculation, I highly recommend you talk to a professional who truly understands the calculation and rules.  I charge $995 to set up the distribution, or $100 per hour to discuss and answer questions (hourly fee can be credited towards a calculation).

Here is a look at the most current (November 2020) and historical 120% Federal Mid Term Rates:


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Readers Comments (24)

  1. I have to assume that the much lower interest rate means that if you started your SEPP today under the same method you did 4 years ago, you would have a much lower allowable withdrawal?

    All of my IRA balances have been converted to Roth at this point, I do have some traditional TSP.

    What’s intriguing is if I do somehow stick around the government until I can get targeted with an early retirement (unreduced pension, and keep same health insurance), at age 53.5, I still would not be allowed to withdraw the TSP at 55 because I would have retired prior to age 55. I just might have to 72t it for six years if for some reason I feel like I need the $$$ and don’t want to draw down my Roth balances.

    But who knows if I will stick with the government for twenty years. 1.5 down! If not targeted for early retirement, the earliest I could go with keeping health insurance is 57 with a 25% reduction in the pension.

    • Hey TJ, correct, using the amortization or annutization calculation for the SEPP, the lower 120% Mid Term Rate would mean a lower allowed withdrawal for someone. Right now that rate is as low as I have ever seen it. There is also the Lifetime/RMD calculation which does not get affected by the rate, it’s ira balance divided by the lifetime expectancy factor in Pub 590.

      TSP can have all kinds of different rules from a regular retirement plan. very low expense ratios though from what I’ve seen

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