Converting a traditional IRA to a Roth IRA when you’re taking periodic payments.
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In general, you’ll pay a 10% early distribution penalty tax if you take distributions from a traditional IRA before age 59½. One of the exceptions to this rule is for certain “substantially equal periodic payments,” sometimes called SEPP payments or 72t payments for the section of the tax law creating this possibility. This page is for people who are receiving periodic payments from a traditional IRA and want to convert it to a Roth IRA.
Note: This is not about required minimum distributions (RMDs), which involve an entirely different set of rules.
Background

I won’t go through all the rules for periodic payments here. The rule that’s important for present purposes is one that says your periodic payments must continue for at least five years or until you’re age 59½ or disabled, whichever is later. If you don’t continue to receive payments according to the method you originally chose, you’ll be stuck with penalties — not just for the year you changed your payments, but also for all the past years in which you avoided penalties under this rule.
Example: You began receiving periodic payments when you were 47. Four years later you decide you need to withdraw the entire remaining balance of your IRA. The 10% penalty applies to all of your withdrawals: the big withdrawal in the year you took everything out, and the smaller ones in the years you were taking periodic payments. If you waited until you were 59½, you would be able to withdraw the entire balance of the IRA without penalty.
This rule raises an issue: what happens if you withdraw the entire balance of your traditional IRA in order to convert it to a Roth IRA? Will you pay a penalty in that case?
Fortunately . . .
The answer is no. The regulations on Roth IRAs say that you can make the conversion without penalty — if you continue to receive the periodic distributions you were receiving before the conversion. The difference is that after the conversion you’ll receive the payments from your Roth IRA. Remember, you’ll have penalties going back to when you first began to receive periodic payments from your traditional IRA if you alter your payment schedule before satisfying the time requirement.
Roth IRA five-year rule
What about the rule that says you pay a 10% early distribution penalty if you withdraw from a Roth IRA within five years after a conversion? This rule is designed to prevent you from using a Roth IRA conversion to avoid the penalty for early distributions from traditional IRAs. It doesn’t apply to distributions that qualify for exceptions to the penalty, so there’s no penalty for periodic distributions.
Pay tax from other sources
Generally it’s advisable to pay conversion taxes from sources other than IRA funds. When you’re receiving periodic payments, you have to be certain that you don’t have to use IRA funds (other than the periodic payment itself) to cover your tax liability on the conversion. If you have to take additional money from the IRA for this purpose, you’ll violate the periodic payment requirement and end up paying penalties as described earlier.