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 (April 2021) and historical 120% Federal Mid Term Rates:

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Readers Comments (23)

  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

  2. Thanks for the explainer. If my investments pan out, this is the plan. The rate is lower than I expected but still better than the penalty for early withdrawal.

    • Hi Sean, rates just posted for April, crossed back over 1%. Also search my site for SEPP or 72t for more info beyond just the rate. I actually talk about my own that I’ve been doing since 2016

    • the rates are slowly creaping back up. Not where they were in the late 90s early 2000s but the higher rate does give more options to someone looking to set up a SEPP

  3. Fabulous, what a web site it is! This webpage gives useful facts to us,
    keep it up.

  4. Thank you for sharing this useful information. I know that after the SEPP distributions start contributions can’t be made changing the balance, but what if you have dividend paying stocks, that technically would increase the balance.

    • Hi Mek, that is not a contribution into the account, so it does not bust the plan. A contribution would be something like rolling/transferring funds into the account or an actual contribution for a given tax year that shows up on form 5498. Search SEPP or 72t and you will find several articles on my site showing my strategy. Dividend growth has provided me a cushion of now $5k over what i need to withdraw each year and the spread is growing each year

      • Thanks for replying. Actually after I posted the question, I did search your site for SEPP and found several posts. I have been binge reading them since. The post gave me the exact info I was looking for. I’m waiting for the rate to increase before starting this year. Thanks for sharing your early retirement journey in such detail.

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