Applying the Rule 72(t) -  How to Utilize it, is very important.

There are three ways to calculate 72(t) distributions.

The Minimum Distribution Method is calculated the same way as required minimum distributions when account owners reach their required beginning distribution date. This method will generally produce the lowest annual 72(t) payments since it is based on the longest life expectancy. 

The required minimum distribution method consists of an account balance and a life expectancy (single life or uniform life or joint life and last survivor each using the age(s) attained in the year for which distributions are calculated). The annual payment is redetermined for each year.

 This is the simplest of methods to calculate and allows seniors to take advantage of growth in their accounts and create larger payments in future years. However, a decline in the IRA balance will reduce future 72(t) distributions.

The Fixed Amortization Method consists of an account balance amortized over a specified number of years equal to life expectancy (single life or uniform life or joint life and last survivor) and a rate of interest that is not more than 120 percent of the federal midterm rate published in revenue rulings by the Service. 

Once an annual distribution amount is calculated under this fixed method, the same dollar amount must be distributed in subsequent years.

This produces higher payments than the Minimum Distribution Method and gives some security in that the payments are fixed. 

But the calculation is complicated and there is the risk that the payments will not keep pace with inflation, or the account will not be able to sustain the payments if there is a significant downturn in the market. 

The Fixed Annuitization Method - This consists of an account balance, an annuity factor, and an annual payment. 

The age annuity factor is calculated based on the mortality table in Appendix B of Rev. Rul. 2002-62 and a rate of interest that is not more than 120 percent of the federal mid-term rate published in revenue rulings by the Service. 

Once an annual distribution amount is calculated under this fixed method, the same dollar amount must be distributed under this method in subsequent years.