Substantially equal periodic payments (SEPPs) allow individuals to take early distributions from retirement accounts before age 59.5 without incurring a 10% penalty. SEPPs must be taken annually for 5 years or until age 59.5, whichever is longer. There are 3 IRS-approved methods for calculating SEPPs amounts: fixed amortization, fixed annuitization, and required minimum distribution. A SEPP analysis can help determine which calculation method provides the optimal payment amount and duration for an individual's needs and situation.

1. ADVICE AND
PLANNING
Understanding Substantially
Equal Periodic Payments
A STRATEGY FOR TAKING EARLY DISTRIBUTIONS
WITHOUT INCURRING WITHDRAWAL PENALTIES
RETIREMENT
Withdrawals from IRAs and employer-sponsored retirement plans before
you reach age 59½ generally are subject to a 10% early-withdrawal penalty,
in addition to any other taxes you may owe on the amount withdrawn.1
One way you can avoid the 10% penalty is by taking substantially equal
periodic payments (SEPPs) from your retirement accounts, if you qualify.
Your Financial Advisor has the tools, including our SEPP Calculator
BEYOND BANKING
Analysis, that can help you determine whether taking SEPPs is the right
strategy for you.2
WHAT ARE SEPPS? WHAT SHOULD I CONSIDER BEFORE TAKING SEPPS?
SEPPs allow you to take annual distributions from Taking early withdrawals from your IRA or an employer-
your retirement accounts before you reach age 59½ sponsored retirement plan is a serious step because it
without incurring the 10% early-withdrawal can affect the resources you’ll have available later in
CREDIT AND
penalty. However, these distributions are still retirement. So before you begin, you should seek
LENDING
taxed as ordinary income. professional tax advice and ask yourself these questions:
n ow urgent is my current need for the money?
H
WHO SHOULD CONSIDER TAKING SEPPS?
n re there other sources I could tap?
A
These early distributions may be appropriate for people
under age 59½ who separate from their employer’s n m I comfortable trading retirement assets for
A
ESTATE PLANNING
a current cash stream?
service or for those who retire before 59½ and need
to fill an income gap.1 Because complex regulations n ill I be able to pay the income tax I may owe
W
SERVICES
govern how SEPPs are calculated and how long you on the payments?
must take them, it’s important that you, your tax n oes my immediate need for money outweigh
D
advisor and your Financial Advisor discuss whether the requirement to take IRA distributions for
taking them is the right distribution option for you. a minimum of five years?
THE SUBSTANTIALLY EqUAL PERIODIC PAYmENTS CALCULATOR ANALYSIS
INVESTMENTS
YOUR ANALYSIS WILL:
1. Incorporate Your Personal Financial Situation
You provide key data, including the birth date for you REPORT SUMMARY
100K
and your beneficiary, the date distributions will begin,
80K
your account type and your account balance.
100K
FOR BUSINESS
80K
60K
SOLUTIONS
60K 40K
20K
0K
Amortization Annuitization RMD
2. Calculate Your SEPPs
40K
The analysis calculates your payments for each of the 20K
three IRS-approved methods—fixed amortization, fixed 0K
Amortization Annuitization RMD
annuitization and required minimum distribution—using
the personal financial information you provided and
certain calculator assumptions.
TRACKING
PROGRESS
To learn more about the Substantially Equal Periodic Payments Calculator Analysis, contact your Financial Advisor.

2. HOW CAN A SEPP ANALYSIS HELP YOU CHOOSE may choose to calculate SEPPs based on the amount in a single
A CALCULATION mETHOD? account, which gives you more control of the distribution
To help you determine which of the three IRS-approved amount. You can set up multiple accounts for this purpose.
calculation methods is appropriate for you, your Financial Terminating or modifying SEPPs before the deadline
Advisor can run a free Substantially Equal Periodic Payments
If you terminate or modify your SEPPs before the deadline
Calculator Analysis. The analysis generates a personalized
of five years or age 59½, whichever comes later, you must
printed report that includes projections of your SEPPs for
retroactively pay the 10% early-withdrawal penalty, plus
each of the three methods (see the chart on the next page).3
interest, on all prior SEPP distributions.
WHAT ARE THE KEY RULES? Exceptions for terminating or modifying SEPPs
Payout restrictions n You may terminate your SEPPs early due to disability
SEPPs must be taken annually for five years or until age or death, or when your account balance is depleted.
59½, whichever is longer. The SEPP scenarios below illustrate n If you are using one of the two fixed-payment calculation
how this rule can affect how long SEPPs are taken. methods, you may make a one-time, penalty-free switch to
the required minimum distribution method (see below for
Eligible tax-deferred accounts
a description of these three methods).
n You can take SEPPs from a traditional IRA, a Roth IRA,
a 403(a) annuity plan or a 403(b) annuity plan. You also can Failure to use the IRS-approved methods for
take SEPPs from qualified employer plans, such as a 401(k), calculating SEPPs
but only after you separate from that employer’s service. n You may be subject to the 10% early-withdrawal penalty
n You are not required to calculate SEPPs based on the if you don’t use one of the three IRS-approved methods for
aggregate amount of all your retirement accounts. Instead, you calculating your SEPPs.
SEPP SCENARIOS
Example 1 Example 2
Bob, age 50, has decided to take SEPPs from his IRA. Sally, age 57, has decided to take SEPPs from her 401(k).
Because he won’t turn 59½ for more than five years, he She must take SEPPs annually until age 62 because five
must take SEPPs annually for 9½ years until he reaches years is longer than the 2½ years that must pass until she
that age. turns 59½.
HOW ARE SEPPS CALCULATED? federal midterm rate during either of the two months
The three IRS-approved methods for calculating SEPPS include: preceding your first payment.
n F
ixedamortization: The annual payment, which is fixed, n R
equiredminimumdistribution: The annual payment
is calculated in the first year and will not change in varies, must be calculated each year and generally is smaller
subsequent years. than the payment calculated using the two fixed methods.
The payment is calculated by amortizing your beginning The payment is calculated each year by dividing the
account balance using an interest rate that does not exceed account balance in that year by the current year’s life
120% of the federal midterm rate during either of the two expectancy factor applicable to you or to you and your
months preceding your first payment and using one of beneficiary using one of the following life expectancy tables:
the following life expectancy tables: the Uniform Lifetime the Uniform Lifetime Table, the Joint and Last Survivor
Table, the Joint and Last Survivor Table or the Single Life Table or the Single Life Table (see IRS Publication 590).
Table (see IRS Publication 590).
PLEASE SEE THE CHART ON THE NExT PAGE FOR A
n F
ixedannuitization: The annual payment, which is fixed,
COmPARISON OF THESE CALCULATION mETHODS.
is calculated in the first year and will not change in
subsequent years.
The payment is calculated by dividing your beginning HOW CAN YOU mONITOR YOUR SEPPS?
account balance by an annuity factor derived from an IRS To track your distributions and make sure they are reported
mortality table (based on your life expectancy or the joint properly to the Internal Revenue Service, Merrill Lynch offers
and last survivor life expectancy of you and your beneficiary) the SEPP distribution service. Ask your Financial Advisor
and an interest rate that does not exceed 120% of the how to enroll in this service.

3. COmPARING IRS-APPROvED SEPP CALCULATIONS
For this hypothetical example, assume Bob, age 50, has a traditional IRA with a $100,000 balance at the beginning of
year one and an 8% annual rate of return. Bob’s life expectancy is based on the IRS Single Life Table. In this example,
Bob would receive the largest annual SEPP distribution using the fixed amortization calculation method.
Fixed Amortization Fixed Annuitization Required Minimum Distribution
Year 1 $6,668 $6,550 $2,924
Year 2 6,668 6,550 3,155
Year 3 6,668 6,550 3,416
Year 4 6,668 6,550 3,686
Year 5 6,668 6,550 3,977
Year 6 6,668 6,550 4,292
Year 7 6,668 6,550 4,631
Year 8 6,668 6,550 4,979
Year 9 6,668 6,550 5,372
Year 10 6,668 6,550 5,796
The amortization and annuitization methods in this example assume a 5.65% interest rate (the maximum interest rate based on the federal midterm
rate in March 2007). The example assumes that distributions are taken on Dec. 31 each year. The distribution methods are outlined in Revenue
Ruling 2002-62. This example is illustrative only and does not reflect the past or future performance of any specific investment.
HOW CAN YOU GET STARTED?
If you are interested in taking annual distributions from your retirement accounts before you reach age 59 1/2 without
incurring the 10% early-withdrawal penalty, ask your Merrill Lynch Financial Advisor to help you determine whether
taking SEPPs is an appropriate strategy for you. Your Financial Advisor understands your situation, your needs
and what you want to accomplish to bring you the right solutions at the right time for you. To learn more about
Total MerrillSM and other Merrill Lynch services, visit www.askmerrill.ml.com.

4. Any information presented about tax considerations affecting your financial transactions or arrangements is not intended
as tax advice and cannot be relied on to avoid any tax penalties. Neither Merrill Lynch nor its Financial Advisors provide
tax, accounting or legal advice. You should review any planned financial transactions or arrangements that may have tax,
accounting or legal implications with your personal professional advisors.
1
If you retire before age 59½ but after age 55, you may be eligible to withdraw assets from your employer-sponsored plan without having to pay the
10% penalty tax.
2
Before taking any distribution, you should discuss the ramifications with your tax advisor. Neither Merrill Lynch nor Merrill Lynch Financial Advisors
provide tax or legal advice. It is important to consult your tax or legal advisors about your circumstances.
3
You should have your tax advisor review the calculator report before deciding to take SEPPs.
L-03-07
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